HM Revenue and Customs (HMRC) brought in £274m ($349m, €300m) from investigations into underpaid inheritance tax (IHT), according to private client law firm Wilsons.
This figure is a four-year high for HMRC, up from £271m in 2018-19.
The taxman opened 5,658 investigations into IHT in 2019-20, which means the average yield from each case was £48,422.
This is a 22% increase from an average yield of £39,763 three years ago in 2016-17.
HNW push
Wilsons has said that HMRC is “continuing to dedicate huge resources to targeting investigations into the estates of high net worth (HNW) individuals” where investigations are more likely to offer a better return on investment for the UK taxman.
The firm added that investigations into IHT typically relate to assets which have either not been declared or have been undervalued.
The average yield from these type of cases has jumped partly because “rising property prices have increased the size of estates being passed on to dependants on death”.
Belinda Watson, partner at Wilsons said: “HMRC will be very conscious that people will be using the impact of coronavirus on the economy to argue that asset values have fallen, they’ll be looking to challenge anything where the fall is too sharp to be credible.”
Undeclared gifts
The law firm added that HMRC is on the lookout for executors failing to declare gifts made by the deceased within seven years before the death, which remain liable to IHT until a full seven years have elapsed.
Other factors that can prompt HMRC to open an investigation include if the person gifting the asset retained some benefit from the asset after making the gift.
The firm said in a statement: “Individuals evading IHT may try to use undisclosed bank accounts or accounts belonging to family or friends to hide assets.
“However, this has become increasingly difficult due to HMRC having access to information relating to global bank accounts.”
