UHY Hacker Young says this made the taxman £70m in additional tax last year — an average of £24,600 extra tax per case.
HMRC is targeting beneficiaries who claim a property they have inherited is worth less than it is to pay less tax. Inheritance tax is payable at 40% on any amount over £325,000.
Mark Giddens at the firm says: ‘If a property is undervalued by £20,000, this could result in an extra £8,000 tax, plus, say, a 30% penalty of the additional tax, making a total of £10,400. That is a considerable sum of money to raise when the estate and its beneficiaries may not be very cash-rich.’
In 2010-11, 16,000 estates paid inheritance tax. Of these, more than a fifth — 3,441 — had the valuation of the property increased, while just 800 had valuations reduced, according to HMRC figures.
When someone dies leaving a property that is not being sold immediately, beneficiaries should get several valuations.
A spokesman for HMRC says: ‘Only about 3% of estates pay inheritance tax, but when the value of the property can materially affect the tax payable it’s right that we confirm the figure. This helps to protect the Exchequer and the taxpayer.’
Beneficiaries have 12 months after the death to submit valuations for inheritance tax before they incur a penalty. However, HMRC can start charging interest six months after the death, so people are under pressure to get valuations and pay the tax quickly.