Joe Bolger
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The taxman has begun a crackdown on people who try to avoid the burden of inheritance tax by making gifts to friends or relatives before they die.
The move will mean that officials at Revenue & Customs scrutinise in more detail the value of money, investments, possessions or property given away in the years immediately before a person’s death.
The crackdown comes amid calls for the Government to lessen the impact of inheritance tax on families. The number of people who have paid the tax has surged by 72 per cent since Labour came to power in 1997.
The inheritance tax issue has risen in prominence with the strong growth in the housing market, which has increased the value of a typical estate. Inheritance tax applies to the estates of people who die with assets worth more than £300,000, once debts have been allowed for.
The rising property market has pushed the value of many people’s estates above the £300,000 threshold, forcing the inheritors to pay 40 per cent taxation on the value of the estate in excess of £300,000.
Although the threshold has been rising, it has failed to keep up with the pace of the housing market. The level is now near £30,000 short of the average price of a house in the UK.
The threshold is set to rise to £312,000 next year and £325,000 in 2009-10.
The increase in the number of people hit by the tax has been accompanied by a jump in inheritance tax revenues. The Government last year booked revenues of £3.3 billion, up from £1.7 billion in 1997. Current forecasts suggest that £3.6 billion will be raised for the 2006-07 tax year.
The current rules allow some large gifts to go untaxed, as long as they are made more than seven years before the donor dies. However, where the gift is a house, the person giving the house would be expected to pay rent, at a commercial rate, where they continued to live in it. The receiver of the rent would then be subject to income tax on the sums received.
Revenue & Customs said that there was now “an increased likelihood that we will ask for further information or seek explanation of what has occurred”, where information provided by those administering the estate is unclear or incomplete.
When a person dies, the executor of the estate is required to declare gifts made prior to the death.
The fresh crackdown will continue until March next year and will include deeper examination of where assets may have been transferred from the person who died. Revenue & Customs has the power to demand financial documents and can levy fines against the executor and the beneficiary of the inheritance. The examination will include looking for examples of loans that were forgiven or the transfer of an asset into joint ownership.
Revenue & Customs said that it would open a formal inquiry where necessary and ask for more information from bereaved families to ensure all necessary information had been obtained. Where a person involved in winding up the estate is found to have been negligent in not disclosing a gift made by the dead person, Revenue & Customs said that it would consider imposing a penalty.
Pressure on the Government to review inheritance tax rules was increased this week at the Liberal Democrats’ party conference, where the party proposed increasing the threshold from £300,000 to £500,000.
Earlier this month, Joyce and Sybil Burden, two sisters aged 89 and 81 respectively, from Marlborough, Wiltshire, lodged an appeal in Strasbourg to win the same exemptions from inheritance tax rules that married or gay couples in civil partnerships enjoy. Under inheritance tax rules, one of the sisters will have to pick up the inheritance tax bill for the house they share when the other dies.

Collecting billions
— Inheritance tax is levied at 40 per cent on estates worth more than £300,000
— Gifts made to family and friends more than seven years before your death are usually exempt
— The number of people liable has risen by 72 per cent since 1997
— Revenues from inheritance tax have jumped from £1.7 billion in 1997 to £3.3 billion in 2005-06
— In 2007-08 revenues are projected to hit £4 billion
Source: HM Revenue & Customs; HM Treasury
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Inheritance tax is evil. Coming to terms with the bereavement of my father from cancer was hard enough without having to deal with the probate and inheritance tax. It has taken so much of my time and money just to get the information needed to fill in all the forms for probate. I feel like I have been kicked in the face by the government when I am already down. I wont be voting for labour again with their stealth tax polices. Where is the incentive for honest hard work, when the government going to take large percentage from your estate when you die? It is double taxation. Might as well sponge off the state, as I am no longer incentivised to work anymore with all the taxes we have to pay.
Converted sponger, bristol,
I am in the process of sorting out my late mothers estate. What I find is so hard is that she was disabled and I gave up my life to look after her for the last fourteen years.This is my home and now I may be faced with having to sell, surely after years of caring the inland revenue should show some compassion but no it is heartless to people like me who are in middle age and have given my life and love to a parent.
jean, doncaster, south yorkshire
Inheritance Tax is currently very unfair 40% and is the Poll Tax for Labour Marginal seats in the South of England due to the rise in house prices. People have already paid tax before the Inheritance Tax. and this is a second bite. Many rich people may leave the country or will Labour block them? Some balance is needed like a threshold of £500,000.
Andrew , London, UK
Surprise, surprise. One day I will die of no surprise ....
So, HMRC are going to get heavy to reap in a few more pounds from Inheritance tax evaders are they?
Perhaps to ease their conscience HMRC may see fit to funeral costs/services being VAT exempt?
Doubt it??
Louise Hardy, Mirfield, West Yorkshire,
I suppose it will be deemed Politically Incorrect of me to point out that this is yet another example of grasping Gordon pulling Darling's strings!
Mike Bibby, St Albans, England -not EU
Inherited money is unearned by the inheritor & justifies a hgh rate of tax. Even though the deceased will have worked to buy a house, the surge in prices has also generated a windfall gain. There is no objective reason why beneficiaries should not be taxed on this money.
Keep it in perspective: ordinary people pay lots of tax on income and spending (Income tax + VAT). It would be obscene to exempt these windfall gains.
John Bohan, Liverpool, UK
Instead of inflicting double and triple taxes on hard-working, tax-paying, honest people to raise revenue, maybe we should stop easy hand-outs to asylum seakers and other benefit spongers. We'd have no need of these stealth taxes then.
Steve, London,
British citizens have turned into Mr Brown's personal tax cow, milked every which they turn. Income tax, NI tax, council tax, Capital Gains Tax, Stamp Duty tax, car tax, fuel tax, road tax, flight tax, congestion charge tax, pensions tax (or was that actually theft?)....... VAT, and these are just the tip of the iceberg....... the rest lie stealthily under the surface. No wonder that being taxed again on death on hard earned, already heavily taxed assets is causing concerns
Sue, London, UK
It is an Inheriance Tax, not a death tax. The dead are not taxed.
The inheritance tax should be taxed as income, i.e. on the recipient as part of their annual income, and the then easy way to avoid tax is for the donor to spread the inheritance as widley as necessary. This would be good for the general economy and lessen the rich/poor devide.
judith feld, west wickham, england
Joyce and Sybil can resolve their problem by setting up an IOU DWT Will like any other cohabiting couple. They can own their house in 50/50 share and, when the 1st of them dies, place their 50% in Trust allowing the survivor to remain in the property during their lifetime. When the 2nd dies, then each 50/50 share passes to whoever they wish as specified in their respective Wills. Thereby each has used their £300k IHT allowance - no European ruling required. I'd be delighted to help them set this up. I can be contacted via www.justwills-southwest.co.uk
Nick Hutt, Minehead, UK
You mean Gordon needs more cash to top up the tax bucket and pay for more big schemes insteand of rewarding working people by allowing them control of their own money.
KR, Stockport,
So someone works hard their whole life, pays tax and NI and then when they want to leave their family a future, (remember it's what they have earned and all ready paid tax on), they then face yet another tax! That's just government theft, there is no other word for it. 40% when someone has already paid taxes their entire life! It should be at most 10% for this theft of property and monies EARNED AND ALREADY TAXED!
When it comes to tax, Britain is ridiculous.
Graeme, LA,
Can you leave things to your pets? Pets are not human and so therefore do not have to pay tax... problem solved.
Graeme, Edinburgh,
YOU PEOPLE!!! The TORIES introduced Inheritance Tax in 1986, so if you want to blame anyone blame them. Oh, but you probably wont because you are all disgruntled Tory voters who hate the fact we have had 10 years of economic stability and growth, which was a complete anathema our previous governing party.
The bottom line with Inheritance Tax is the old adage that it is a tax paid by people who love the revenue more than their own family. All you need to do is carry out some simple tax planning, often for little or no cost and watch your IHT liability disappear...or you could do nothing, carry on grumbling in ignorance and land your progeny with a big tax bill! The choice, as they say, is yours!
Tony, Bristol,
The best people to tax are the rich and the best time to tax them is when they are dead.
Graham, London, UK
This is only a short term problem. By the time the next generation is ready to pop its clogs they will have been bled dry by government, the health service and lack of pension funds.
Iâm just waiting for the introduction of a green tax for Farting. (It all adds to ones carbon footprint you know)
Mike, Ulm,
I agree. Gordon has always been greedy and the British public are easy pickings. Does it help Labour? Probably as the a large percentage of the voting public in the new age are living of state benefits and see no reason why hard working people shouldn't pay more so they can live a comfortable life. I for one am seriously looking at alternative countries to emigrate to. Let the government make an island with a worthless population if it wishes.
Jeeves, London, England
I don't need the government's permission to give my nephews a fiver just because I love them. Why then, does the scale or timing of the gift alter the fundamental position of looking after one's family - isn't this one of the values the government is lamenting the loss of? Sure, I may make a gift to legally avoid my family paying tax, that's in the interests of my family. Just as closing down a fraud investigation was in the 'interests of the country.' Does the government think that once I've died they have the right to review the decisions I made regarding the security of my loved ones? If I make a sizable donation to the 'Labour' party and and then die would they be penalised? Or would I just receive a posthumous peerage?
Unimaginative, short-sighted, unstatesman like, party-politcal, nest-lining, selfish excuses of men and women have lost sight of their true responsibilities and the burden of honour election ought to engender.
Ged, Oxford,
I think this really takes the cake, Scrooge was a spend thrift compared to this lot.
Instead of HMRC the name should be changed to Grave Robbers & Co.
What incentive is there in the UK to save and Prosper only to be Robbed on your Death Bed.
The government is wondering why we have growing Violence on you streets and the younger generation don't seem to care.
Well if the Government is hell bent on TAXing us to the hilt ,why bother in the first place to earn and pay your way.
I am one who worked day and night for years and the benefits are ZERO in my retirement.
Can Palpitations not understand we the Public are NOT here to earn so they can squander, they have no idea of the real world in which we live.
If the British Public Elect another Labour Government I for one am off to live some place that I wont get Robbed on a daily biases. No wonder the cream of our Educated Young are Leaving to live in more democratic places.
Just Remember we are NOT Citizens we are Subjects
Terry, Newtownards, Down
A completely unjust tax. Why should we work hard all our lives and pay the correct taxes on our assets to then be taxed a second time on death. Farcical and a vote loser if inheritance tax continues - beware New Labour.
Jonathan, Bristol,
Gordon Brown won't stop until we are all taxed into oblivion, broke, no pension and destitute. Seriously we need to sack New Labour as quickly as possible if any of you want any money in your pocket.
Laurance Allen, Bodrum, Turkey
disgusting
JP, Essex, UK
No matter how much effort Gordon Brown puts into trying to change our perception of him we all know that behind the new suits and the charm offensive he remains as always "Mr. Tax and Spend Brown" a.k.a "Mr. Stealth Tax".
I guess that thinking up new stealth taxes is what turns him on. His subordinates probably get promoted on the basis of how many new taxes they can think up, too.
Stop trying to pull the wool over our eyes, Mr. Brown, you are an emperor without clothes !
Jimmy, Nottingham, England
In Britain we have multi taxation, people pay tax on income then pay steath taxes. Isnt it time we simplified the Taxation System, pay once on income then what purchase or give away should be tax free to increase the taxed sales within the economy.
If you bye your house over 25 years with tax payed income then no more tax should be paid on it when you die.
Laws can be morally wrong.
Peter, Hastings, UK
This death tax is a disgrace. The very wealthy can and do find ways of avoiding such taxes but the average person can not do this. I wonder how Mr Brown proposes to avoid it. May be he should give some advice to others of his ideas!
M. J. Hope Cawdery, Portadown, UK
Labour won't get rid of it, neither will the Tories. The Lib Dems say they will, but they will increase other taxes to cover the loss.
It doesn't matter who you vote for, the money required to run the country will remain roughly the same, therefore, the overall tax burden will remain roughly the same.
The only way for the tax payers of the UK to get fairer taxes, is for one party or another to reduce the amount spent.
This can only be achieved by taking the appropiate actions over asylum seekers, illegal immigrants, our own workshy,
red tape in the civil service, including the police and probably pulling out of Iraq and Afghanistan.
Now is any party prepared to do that or do we need to start a new one?
tony, birmingham, uk
Unfortunately our lords and masters in Whitehall are Tax Addicts. No matter how much of the stuff they get, it's never enough. They always want - no, NEED - more. As we can all see, our problems do not stem from insufficient tax being levied. So much is raised that the Government has to find imaginative ways of dissipating it, such as the NHS IT scheme, recruiting thousands of tax parasites into quangos, and war. If paying more tax were the answer to our problems, we should all be very happy by now. We should instead see the tax addiction for what it is, a pychological dependency that is destructive to Government and harmful to those who support the Government financially.
Frank Upton, Solihull,
It's a bit much that the executor should be fined for not giving details of gifts that he/she could very well know nothing about. I agreed to act for my relatives Mother after she had died but I knew absolutely nothing about her financial affairs prior to death, only what was left behind. It could well be that a gift is made to a person that is not named as a beneficiary in the will and thus unknown to the executor. We tread in very murky water.
anthony box, Wretton, Norfolk
HM Revenue & Customs; HM Treasury = Parasites & Thieves
The UK has around 150 separate taxes that each and every one of us pay every year, so that labour can have their pet projects to buy votes. Our tax burden is in total one of the highest in the world.
Then they bang on "death tax" on top of that!!
paul, london,
This government is feckless and greedy, and customs and excise are bully boys.
The whole system should be turned on its head and the government prevented from taking more than an agreed % of an individuals income/wealth and GDP.
Ultimatley we have to have a flat tax system or it needs to be collected in VAT. Either system would dramatically reduce the cost of collection, and administration. They would also reduce the stress on taxpayers and the taxpayers cost of compliance and would be a fair and transparrent system.
All evidence also shows that the amount of revenue raised would also go up. and the only losers being the multitude of tax avoidance schemes, accountants and advisers who would become unneccesary.
Steven Katirai, Newcastle Upon Tyne, UK