HMRC checks on inheritance tax accounts

Q: What powers and penalties sit behind a check?

Information notices. The old inheritance tax powers have been replaced by Schedule 36 FA 2008 (IHTM09331). Penalties. An account under section 216 IHTA 1984 is within the inaccuracy penalty regime of Schedule 24 FA 2007. Penalties can also arise for late accounts and failing to correct an error within a reasonable time (IHTM36010). Time limits. Where an account was delivered and the tax paid and accepted, HMRC normally has 4 years from the later of the last payment and the due date, 6 years for careless behaviour and 20 years for deliberate behaviour, under section 240 IHTA 1984 (CH56800). Omitted assets carry a 20 year limit. Disputes. If negotiation fails, HMRC can issue a notice of determination, which can be appealed to the First tier Tribunal (IHTM09080).

Q: How might a check play out?

Illustration only. An IHT400 includes a house at £400,000 based on one agent's figure and household contents estimated at £2,000. Six weeks later HMRC writes that it is checking the estate. The Valuation Office Agency considers the house worth £430,000 after inspection, and HMRC asks for 12 months of bank statements, which show monthly transfers of £1,000 to a grandchild. The executors provide the statements, an income and spending schedule showing the transfers came from surplus pension income, and comparable sales supporting a lower figure. The house is agreed at £415,000, the gifts are accepted as exempt, and HMRC sends a revised calculation with interest on the extra tax.

HMRC risk assesses every inheritance tax account it receives. Most are accepted, often after the Valuation Office Agency has looked at any property, while those showing the highest risk of lost tax go to a compliance team for an enquiry. HMRC’s guidance says that if you have not heard anything 14 weeks after sending the IHT400, no further checks will be made; if a check is opened, HMRC writes and then phones within 8 weeks to explain what it is checking.

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What happens to an IHT400 once it is sent?

HMRC works out the tax and any interest and writes with its calculation. Separately, it sends a code confirming enough tax has been paid for probate, usually within 20 working days of receiving the IHT400 or the payment, whichever is later. The probate code is not a sign that the account has been accepted: the compliance review runs alongside and after it.

Inside HMRC, Customer Compliance teams risk assess all new cases and decide which can be handled by customer service staff and which need a fuller investigation (IHTM01030). The manual at IHTM09022 says most accounts are correct, and often the only work needed is a property check with the Valuation Office Agency and collection of any extra tax. For how to prepare the account itself, see completing the IHT400.

How does HMRC decide which accounts to look at?

IHTM29031 describes two stages. Risk assessors first select the accounts posing the highest risk of loss of tax and summarise the risks. The investigator then risk assesses the case again and decides which aspects warrant an enquiry. Enquiries are meant to concentrate on aspects with a significant risk of loss of tax where the extra tax is likely to be collectable, although a point of principle can justify an enquiry with little tax at stake.

Once a case is selected, the investigator is told not simply to check the account but to build a picture of the deceased’s finances from other sources (IHTM09022), to put themselves in the shoes of the deceased, and to avoid fragmented or speculative questions that are likely to yield little tax (IHTM09023).

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Why do property and share values get questioned?

For property in the United Kingdom, HMRC relies on the Valuation Office Agency, or its equivalent agency in Northern Ireland (IHTM23002). Unquoted shares and some other assets go to HMRC’s Shares and Assets Valuation team. The gov.uk guidance confirms that either may contact the executors, and if they decide an asset is worth more, HMRC sends a new calculation once the value is agreed.

Points that commonly draw questions:

Estimated values. IHTM09035 calls them obvious candidates for scrutiny, though small estimates consistent with the rest of the estate are normally accepted.
Sales after death. If a property is sold and the executors adopt the gross sale price, HMRC can dispense with a referral, provided the sale was at full value and not to a connected person (IHTM23185).
Low values. A value agreed for inheritance tax, expressly or by HMRC accepting the tax on it, becomes the beneficiary’s base cost for capital gains tax under section 274 TCGA 1992 (IHTM09241 and IHTM09242). An undervaluation can cost the family later.

Our page on valuing property for probate covers how to get the figure right first time.

What draws questions about gifts and bank accounts?

The gov.uk guidance says the estate’s value includes gifts made in the 7 years before death. Investigators are told to analyse bank statements carefully (IHTM09061), looking for:

income suggesting undisclosed assets, such as rent or dividends from assets not in the account;
transfers in from unknown accounts, possibly abroad, and significant foreign currency movements;
standing orders to life assurance companies; and
large unexplained transfers out, which may be gifts that should have been declared.

Claims that regular gifts were normal expenditure out of income are another common area. HMRC’s view at IHTM14250 is that, without evidence to the contrary, surplus income becomes capital after two years, and it says claims based on several years of accumulated income should be denied.

Is a valuation referral the same as an enquiry?

No. A referral to the Valuation Office Agency, Shares and Assets Valuation or the heritage team is not normally an enquiry if it is the only issue; it becomes one only if the executors dispute the specialist’s view (IHTM29014). An enquiry is opened when HMRC writes because it thinks something is wrong or needs fuller explanation: disputing a value, liabilities, exemptions or reliefs, asking why items were omitted, or challenging careless conduct with a view to penalties (IHTM29012).

How long does the process usually take?

The published markers are the 14 week point after which no further checks will be made, and the phone call within 8 weeks of HMRC’s letter opening a check. HMRC will agree a date for any information it asks for. A Valuation Office Agency referral can pass through up to five stages: initial appraisal, inspection and valuation, negotiation, determination and litigation (IHTM23221). Simple cases end at the first or second stage; disputed values take longer.

Executors also have to report changes. The gov.uk guidance says to tell HMRC once values are final or 18 months after death, whichever is sooner. Before then, you need to report changes only in certain cases, including changes in value to property or unlisted shares, a rise or fall of more than £50,000 in the estate, or where further checks are being made. Changes go on a corrective account. When everything is agreed, executors can apply for an IHT30 clearance certificate.

What powers and penalties sit behind a check?

Information notices. The old inheritance tax powers have been replaced by Schedule 36 FA 2008 (IHTM09331).
Penalties. An account under section 216 IHTA 1984 is within the inaccuracy penalty regime of Schedule 24 FA 2007. Penalties can also arise for late accounts and failing to correct an error within a reasonable time (IHTM36010).
Time limits. Where an account was delivered and the tax paid and accepted, HMRC normally has 4 years from the later of the last payment and the due date, 6 years for careless behaviour and 20 years for deliberate behaviour, under section 240 IHTA 1984 (CH56800). Omitted assets carry a 20 year limit.
Disputes. If negotiation fails, HMRC can issue a notice of determination, which can be appealed to the First tier Tribunal (IHTM09080).

How might a check play out?

Illustration only. An IHT400 includes a house at £400,000 based on one agent’s figure and household contents estimated at £2,000. Six weeks later HMRC writes that it is checking the estate. The Valuation Office Agency considers the house worth £430,000 after inspection, and HMRC asks for 12 months of bank statements, which show monthly transfers of £1,000 to a grandchild. The executors provide the statements, an income and spending schedule showing the transfers came from surplus pension income, and comparable sales supporting a lower figure. The house is agreed at £415,000, the gifts are accepted as exempt, and HMRC sends a revised calculation with interest on the extra tax.

What mistakes prolong a check?

Leaving estimates in the account without reporting final figures.
Using a marketing figure from an estate agent rather than a reasoned open market value.
Not keeping records of regular gifts and the deceased’s income and spending.
Assuming the probate code means the account has been accepted.
Slow or partial replies, which invite information notices. Executors remain personally liable for the tax until it is settled.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.