IHTM30462 - Limitation of liability by lapse of time: time limits for recovery of unpaid tax

No person is liable to pay additional Inheritance Tax that is attributable to any property after four years from the later of;

• the date on which the payment (or in the case of tax paid by instalments (IHTM30191) the last payment) was made and accepted, and
• the date on which the tax or the last instalment became due

where tax attributable to that property is paid in accordance with an account duly delivered to the Board and the payment is made and accepted in full satisfaction (or would have been had there been an amount of tax to pay), IHTA84/S240(2).

The account referred to is the IHT100 or IHT400 initially delivered by the taxpayer.

The point at which the four-year period (or longer, as appropriate) begins to run in relation to cases where it is later discovered that additional tax should have been paid varies.

In most cases and unless HMRC writes to the customer to say otherwise, the issue of form IHT421 (England, Wales or Northern Ireland) or SL189 (Scotland) will constitute HMRC’s acceptance of the tax or nil value returned on a form IHT400. The four-year period (or longer, as appropriate) begins to run at this point in relation to cases where it is later discovered that additional tax should have been paid.

Where HMRC advise the customer that the account is being looked at in more detail and the customer is not informed within 12 weeks that a compliance check will be carried out, it can be assumed that HMRC does not have any questions about the information and values returned on form IHT400. This 12-week timeline was announced in a special edition of the Trusts and Estates newsletter published in April 2018. The four-year period (or longer, as appropriate) begins to run at the end of the 12-week point.

For form IHT100, HMRC will write to the customer to confirm receipt and provide a date 12 weeks in the future by which they can expect to hear from HMRC if there are any questions. If nothing is heard by the date given, the customer can assume that HMRC do not have any questions. This timeline was announced in the Trusts and Estates newsletter published in April 2022. The four-year period (or longer, as appropriate) begins to run at the end of the 12-week point.

In the rare event that HMRC does not issue form IHT421/SL189, the onus will be on the customer to apply for a certificate of discharge under IHTA84/S239(2). Where HMRC do not write to the customer to confirm receipt of the IHT100 form, the onus will again be on the customer to seek clearance. The certificate will constitute HMRC’s final acceptance of the tax or nil value returned and HMRC will not be able to raise any further queries provided no assets are omitted.

If the loss of tax was brought about ‘carelessly’ the time limit for recovering any additional tax is six years; IHTA84/S240(4) and where the loss of tax was brought about ‘deliberately’ the time limit is twenty years, IHTA84/S240(5).

IHTA84/S240B, introduced by FA2019/S81, extended the time limit for recovering any additional tax to twelve years where the loss of tax involves an offshore matter, or an offshore transfer which makes the lost tax significantly harder to identify (IHTM30465).

Any HMRC charge on the property expires at the same time.

Where no account has been delivered, IHTA84/S240(2) cannot apply. Instead IHTA84/S240(7), applied by IHTA84/S240(6), sets a twenty-year time limit where no account has been delivered and the loss of tax was not brought about deliberately by the person liable for the tax, or a person acting for them.

It follows, where no account has been delivered and the loss of tax was brought about deliberately by the person liable for the tax, or a person acting for them, that there is no time limit for the recovery of the unpaid tax.

Similarly, where an account has been delivered but which omitted an asset that is later disclosed, IHTA84/S240(2) does not apply (as the tax attributable to the value of the undisclosed asset cannot have been paid in accordance with the account that was delivered). And for the same reason the time limits in IHTA84/S240(4) & (5) cannot apply.

As an omitted asset does not fall within IHTA84/S240(2), it is the twenty-year time limit under IHTA84/S240(7) that applies; so generally, with an undisclosed asset where the loss of tax was not brought about deliberately, the tax may be recovered up to twenty years after the date of death. But in the event that omission, and so the loss of tax, was deliberate, there is no time limit for the recovery of the unpaid tax.