What, if anything, is required after death?

Keep_pedalling

CKhalvashi said:

poseidon1 said:

Keep_pedalling said:

A couple more thoughts on this. 

If a person dies intestate having previously given everything away then the beneficiaries of that person’s gifts are responsible for any IHT due. In a case like this HMRC are likely to take the line that this is deliberate tax fraud committed by the deceased and their beneficiaries so the penalties are likely to be harsh such as in the case of Hutchins vs HMRC.

 https://www.lawjournals.co.uk/wills-trusts-law-reports/hutchings-v-hmrc-2015-ukftt-0009-tc-on-appeal-from-tc-2013-00644/

Another consequence could be the loss of the transferable NRB and RNRBs. Both of these exemptions need to be claimed but if no one files an IHT return the HMRC may not take those into account when working out how much each person owes.

Finally do these people want to live with the thought that any time over the coming months or years (there is no time limit for HMRC to demand unpaid tax) they me be caught) 

The Hutchings case puts me in the mind of Nadhim Zahawi ( past Tory Chancellor), and the penalty he incurred for failing to pay CGT on sale of his private company. In his case, his attempt to hide his liability ( via offshore trusts )  attracted a 30% penalty of around  £1 million on top of the liability itself.  

In the OP's case, it would only take 1 disgruntled whistle-blower within the wider family/friends circle to attract  HMRC's  attention or for HMRC to joint the dots themselves,  for potential dire consequences to befall the gift recipients. 

Whether deliberate or not, the OP's case does seem to have the hallmarks of conspiracy to commit fraud especially if he does proceed to  pass on to the family some of points raised in this thread. Ironically by sharing these points  with them, the family could no longer plead ignorance of the rules.

This amount will be reducing anyway annually, so their friend stands to gain more than the headline 60% from this in any event.

If you are referring to taper relief that would only apply if the gifts over £325k were made 3 years or more before the person died which does not seem to be the case here. It is possible that the 34% rate may apply if the gifts were made close to the beginning of the new financial year 2021 and the death occurred recently this year.

Olinda99

thanks for all the comments

As I understand it from the comments it seems like HMRC run a check for every death to see if property has been sold etc in the previous seven years in that name?

 I did not know that.

mybestattempt

@Olinda99

Apart from the ability to cross reference deaths and property disposals (both are in the public domain) I think it's been pointed out to you that HMRC have other internal and external information available to them and I would add they also have legal powers to obtain information where a loss of tax is suspected.

Perhaps, as well as advising your friend about the potential financial implications of failing to make an IHT return, it may also be prudent to point out that HMRC regularly publish information which names deliberate defaulters.

Olinda99

thanks for all the input

Keep_pedalling

Olinda99 said:

thanks for all the input

Glad you found it useful, please get your friend to have a read of this thread.

Linton

sheslookinhot said:

RAS said:

Then their liability for the increasing debt to HMRC increases, as do the penalties. So they could lose the lot to HMRC in time.

HMRC doesn't move quickly as those wanting to sort out the IHT liability find frustrating.  But they will wake up one day.

I assume by “their liability” you mean the 3 children of the deceased. 

What debt to HMRC do they have ? Why would HMRC know anything about them ?

The potential liability the children have is if the friends mother was worth £1.7M 3 years ago and she gave all her money away less than 7 years prior to death the mother’s estate can be assessed as owning the assets at death and so liable to IHT.  If the mother’s estate cannot afford the tax HMRC  can recover the missing money from the recipients of the gifts.

As to how would HMRC know, it hardly takes the skills of Sherlock Holmes to investigate the sale of the house and Mother’s bank statements. 

Olinda99

True, but why would they ?

Unless they do it for every death ?

Keep_pedalling

Olinda99 said:

True, but why would they ?

Unless they do it for every death ?

Because part of their job is to monitor for tax evasion. They don’t have to check every death but they have systems in place that flag up potential fraud, and the transfer of very large sums of money, followed by the death of the giver, followed by the lack of any attempt to file an IHT return is almost certainly going going to raise a very big red flag followed by an investigation.