The IHT400 is often approached as a form-filling exercise. In practice, it rarely is.
Even where an estate appears straightforward, there are a number of areas where issues commonly arise. Most of these are not technical in nature, they tend to stem from incomplete information, assumptions being made too early, or a lack of clarity around how certain assets or arrangements should be treated.
Set out below are some of the more common mistakes we see in practice when preparing inheritance tax returns.
Gifts made in the seven years before death are frequently overlooked, particularly where records are incomplete or informal.
This is often not deliberate, families may simply not have full visibility of what was given and when. However, from an inheritance tax perspective, this is a key area and needs to be considered carefully.
Using estimated or informal values (particularly for property) is a common issue.
Whilst this may seem reasonable at the outset, it can lead to problems if HMRC challenges the position or if the values are not consistent with market evidence.
Trust arrangements are often misunderstood or not fully considered.
In particular, loan trusts and gift trusts are frequently assumed to sit outside the estate entirely, which is not always the case. The correct treatment depends on the structure and documentation.
It is not uncommon for different parts of the IHT400 to tell slightly different stories.
For example:
These inconsistencies can lead to delays or queries from HMRC.
Liabilities can be either missed or incorrectly included.
Not all debts are allowable for inheritance tax purposes, and this is an area where assumptions can lead to errors.
One of the most common practical issues is information being provided in stages.
This often leads to:
A more structured approach to gathering information upfront can make a significant difference.
Perhaps the most fundamental issue is treating the IHT400 as a purely administrative task.
In reality, it requires judgement, particularly in areas such as:
Approaching it in this way tends to lead to a more robust outcome.
Most IHT400 issues do not arise because an estate is unusually complex. They arise because key areas have not been identified or considered properly at the outset.
Taking the time to approach the return in a structured way can prevent delays and reduce the risk of HMRC enquiry.
If you would like a second pair of eyes on an IHT400 before submission, or need support in working through any of the issues above, please get in touch.
Alternatively, if you are a solicitor or adviser looking for support on inheritance tax matters, we would be happy to assist.
