Avoid unnecessary penalties – read HMRC’s Trusts & Estates April 2014 Newsletter
The April 2014 Trusts & Estates Newsletter is now available off the HMRC website. It is as usual a helpful update of some of the developments in policy and practice from HMRC.
No receipts for IHT
As part of the ‘no contact unless absolutely necessary’ policy HMRC will not issues receipts for payments of IHT, even if you ask them. The best method of payment is via one of the electronic banking methods e.g. CHAPs so you will get an early entry on your bank statement; if you send a cheque, because you cannot use electronic banking, then there will only be an entry on the bank statement once the cheque has been presented.
Use the correct forms
Trust & Estate SA900 Tax Return form has been updated for 2013/14 and the IHT 205 and 217 forms have been updated. The IHT 205 and its accompanying notes (IHT206) are largely changed to reflect the changes to pensions and improve the questions which relate to them.
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Excepted estates & deduction of debts etc
The Finance Act 2013 introduced rules that restrict the deduction of liabilities in certain circumstances (s.162A-C and s.175A). These rules have been extended to a limited extent to excepted estates by virtue of the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations SI 2014/488 and apply where the death is on or after 1 April 2014. The assumption that the debt will be paid during the administration of the estate applies when working out the net chargeable estate for these purposes.
Reporting amendments to IHT 400
This is probably the most important item in the newsletter. Please read it carefully. The requirement to report amendments to the return has always been with us and has undergone various changes in practice particularly in recent years. As stated above HMRC are anxious to avoid unnecessary communications with taxpayers and agents but equally must collect the correct amount of IHT. So, we are now advised to use the C4 Corrective account to notify the small amendments in one fell swoop where the estate is likely to be administered within 18 months of death and where there is no compliance check underway.
There are other important exceptions but for the simple estate if you have NOT received a compliance check letter you can safely wait until you have all your adjustments and send them in on the C4 within 18 months. Where you have received a compliance check letter at the outset remember to think carefully about reporting alterations at any stage to avoid penalty complications.
Changes to the manuals
A useful list of recent changes to the manuals is contained in this newsletter. You should read the changes made to the Loss on sale relief chapter of the IHT manual in conjunction with Peter Nellist’s article on the topic on the LawSkills website.
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