Essential Principles for Executors when completing an IHT400 return
When applying for a grant of probate, Executors generally complete two declarations. One is on oath, when the probate application is sworn. One is the statement to the Inland Revenue of the financial value of the estate for taxation purposes.
When completing the IHT400 in a taxable estate, the executors need to be aware that they are making official statements to the Inland Revenue. These are listed at page 12 (box 119) of the form. The executors, when signing the form state (in brief) that:
a) They have made the fullest enquiries reasonably practicable in the circumstances and that should any values be estimated, they will inform the Inland Revenue of these as soon as they know it.
b) That where spousal relief is being claimed, the executors have done their best to ascertain that the deceased was legally married to the surviving spouse
c) That they understand that they may be liable to prosecution if they deliberately conceal any information that affects the liability to Inheritance Tax arising on the deceased’s death or if they deliberately include information in the account that they know to be false
d) That they understand that they will have to pay penalties if the account is delivered late or contains false information that they fail to remedy within a reasonable time.
e) That they understand that the submission of the form does not guarantee that the Inland Revenue has accepted the facts are as stated
f) That the Inland Revenue may investigate the estate in detail after the Grant of Administration.
The executors should also be aware that the new rules on penalties apply to Inheritance Tax, just as much as to Income Tax and any other tax. Inheritance tax can face penalties of up to 100% of the tax due, depending on the severity of the error in the account (whether it was deliberate or careless, concealed or without concealment )and what assistance the taxpayer has given to the Inland Revenue to put matters right, and how speedily any error was noticed and rectified.
For more information on the penalty regime, please see http://www.hmrc.gov.uk/about/new-penalties/faqs.htm#39