What happens when you hide gifts?
By Rebecca McCarthy
STEP recently reported that a son who failed to declare gifts totalling nearly £450,000 made to him by his father, before his father’s death, has received a penalty from HMRC of £87,533 in addition to having personally to pay £47,000 in inheritance tax.
The executor both wrote and spoke to family members and specifically asked whether any gifts had been received from the deceased in the seven years prior to his death. No such gifts were disclosed.
Almost two years later, an anonymous tip-off alerted HMRC to one of the beneficiaries having an undisclosed offshore bank account. On investigation the gifts (received from the deceased’s [also undisclosed] offshore bank account) were discovered.
The beneficiary paid the inheritance tax bill but appealed the penalty on the basis that he did not know the account should have been disclosed and the executors should have searched the house more thoroughly, in which case they may have discovered the accounts and the gifts.
The court disagreed. The First-tier Tribunal found that executors are able to rely on information provided by family and advisors and the beneficiary had deliberately withheld the information.
A warning to all beneficiaries: Make sure you answer all questions from executors honestly!
Rebecca McCarthy is a paralegal in the Private Client team at Barker Gotelee.