[Closed] Inheritance and the seven year rule

I guess you get properly fingered either way.....

It is executors' responsibility but it is best practice for transferee of PET to indemnify them as they are the one with the value. There will always need to be a document for a land transfer otherwise it won't be reflected at land registry.

When you sign the IHT return the person the pr gives a declaration that the info is true to the best of their knowledge and belief = that you have made all reasonable enquiries,and HMRC can query that as necessary.

Is it an executors obligation to find out all the IHT liabilities or is it HMRCs?

Its not the HMRCs obligation - I imagine its just like doing your tax return in that they'll take what they tell them on face value. If they decide to query anything I expect its you're obligation prove what the situation is - just as a tax investigation is something that you have to fund. They only ask the question, the hard work is in answering it.

Theoretical Qu came up in the pub tonight.

I know - I read all about it on Trip Advisor

Scrap that, didn't answer your question one iota.

Seek professional advice.

yes a transfer will be documented at the land registry, but who's to say whether an executor ever knew about the historic asset ownership and it's transfer?

Kind of like Rumsfeld's known unknowns and unknown unknowns.

Here's a scenario that came up:
Dead guy owned a property, transferred it at <7yrs for no value to someone (who may or may not be a beneficiary of the estate), executor has no knowledge of the property or the transfer, how is she supposed to know that HMRC need to be aware of it? How is she supposed to find out about it if dead guy is dead and transferee keeps schtum?

Is it her responsibility or the transferees or the estate or HMRC?

macc - I think Im with you on this. The executor is protected by demonstrating they acted reasonably,

(cheers slackalice, no it didnt but interesting all the same 😉 )

Sound like someone took your mum and sister for a bit of a ride there.

As Nipper states, with enquiries made to accountants and solicitors for any large value transactions they may have been involved in.
Regardless of all this speaking to a family friend who's an HMRC Investigation Officer the majority of their cases start off from family fallouts and disgruntled employees/business partners.

No idea, as my accountant BIL handled the probate after my mum's death, but he did say that they can look into all sorts of stuff and are tough to satisfy.
Try to pull the wool over their eyes at your peril as the penalties are harsh and will only encourage them to pry deeper.

v v interesting craig.

We were discussing a transfer done without an accountant or a solicitor (easy to do), no real trail except TR1 at the land registry,

the majority of their cases start off from family fallouts and disgruntled employees/business partners.

telling. suggestive that asset transfers and linking to corresponding deaths are very hard for HMRC to keep an eye on.

It'll also depend on the value of the (whole) estate too.

And, one thing also in England/Wales beware of care costs for the one that gave stuff away, not sure if there is a post-death 'tally'.

cheers b r but it's not quite what we were considering, we were more interested in the mechanism by which historic assets got "roped" into the estate calculation for IHT.

While I've no idea, I ought to since we were 'gifted' from my folks.

Luckily in a way property is cheap around here, and the house had had questionable work done so valued below the 'threshold'.

But I'd talk with a solicitor, even theoretically if there is a concern.

It was probably harder in the past but much work has been done making these searches easier and quicker to do.

Well over a decade ago we had a client who we knew was dodgy as hell. We managed to get his true income for his business and thought we knew and declared all his rental income. We got the dreaded self assessment enquiry letter through. Went through the tax return in question double checking all the income and records. Sat at the table with tax man and our client we were quiet confident that the meeting would be over quickly. Taxman started with the basics going through the business income then moved onto the rental properties stating they all appeared to be good order and well recorded. I felt quite good until he turned to the client and passed him a list of 8 properties that we'd never heard of and simply stated what about the income for these properties that are registered to yourself. The look on his face was priceless our fees to sort it all out weren't.

executor must be first port of call...
But if they are in the dark - they could ask solicitors, and bank managers - stockbrokers too (and accountants, as you say).

But if the donor was determined, and if it wasn't a land registry matter (back to your wedge of cash) then it would be very hard to trace. Are banks obliged to keep records of large cash transactions? Solicitors?

I was thinking this - even to a small extent - about being my mums executor. Supposing I didn't know she'd withdrawn say even £5k and given it to a close friend - would I be any the wiser?

There may be some alert system in HMRC when someone has filed tax returns indicating a certain level of assets, and the there is a step down.. But doing a reverse lookup to see when and if certain assets went out of scope - tricky!

Don't forget you have the money laundering regs with amounts that would be indivually below the limit but can cumulatively exceed it within the time frame.
Again no automatic system to ring the alarm bells at HMRC but random spot checks or someone bitter they didn't receive as much in the will as they thought the would and it's all available.

indicating a certain level of assets

Since we dont tax assets in the UK, there is no reason for the Revenue to know your assets. Its not on a tax return. (certainly HMRC dont know what I own)

So still we come down to an executor in the dark, asks around, but if no info is forthcoming, its relatively easy to hide a transfer (do it yourself, no consideration/cash foot print at bank) and HMRC none the wiser.

You need to complete an SDLT 1 on property transfers as well so HMRC will be theoretically aware of it.

true.

In principle, they only "know" through the honesty of the donor and recipient. Of course large assets tend to leave a paper trail of some sort, and you are supposed to keep records for 7 years.

Having recently received a PET myself, I certainly assume it's my responsibility to 'fess up if the situation arises, and the bank statements make the situation pretty obvious anyway if HMRC came looking. It would probably have been possible, but tedious, to make the transfer effectively untraceable if I was desperate to commit tax fraud. But I'm not, at least not on that scale and not in the UK. I'm sure there are cases where recipients don't realise the tax implications and get away with it, especially with gifts that are not really vast (but still over the exemption limit), say a car or expensive holiday, that should in principle be added to the estate.

Why are you back from the pub so early?

good point. well made.
because the good wine is at home

HMRC have had a bit of a drive to convince people that their computing power has gone up spectacularly.

[url= http://www.telegraph.co.uk/finance/personalfinance/tax/11697816/What-does-the-taxman-know-about-you-your-finances-and-your-lifestyle.html ]Here, for example[/url] is a terrifying description of the reach of the Connect system.

I don't really know how much of this is bluff, but the idea appears to be that the Connect system can indeed put together the name of the deceased on the IHT account with any entries on the Land Registry and this will potentially trigger an enquiry if there is a Land Registry transaction that doesn't show up on the return. Ditto presumably for cars and potentially for bank transfers.

I agree that moving cash or the contents of safe-deposit boxes around is not necessarily either (a) known to executors or (b) readily traceable by HMRC.

🙂

Chilling indeed..

Still sounds a bit like the old "TV detector" van wheeze though. I visualise 2 bored taxman sitting in front of an excel printout with a the word "Connect" at the top and brandishing a highlighter.