As a result of the practical difficulties that individuals are experiencing from the measures in place to stop the spread of coronavirus, HMRC has announced a further change to its usual practice – this time to the accepted procedure for a crucial IHT form.
Form IHT100, the ‘Inheritance Tax Account’, is the form used to notify HMRC regarding an occasion when IHT may arise, for example, the ten-year anniversary of a discretionary trust or the ending of an interest in possession in settled property. Ordinarily this form needs to be signed by all the Legal Personal Representatives (‘LPRs’) or Trustees and the original form submitted to HMRC. In April 2020, HMRC announced that it would accept 'printed signatures' on these forms but only where a professional agent is acting.
Last week, HMRC announced a further change. It will now accept these forms where they are not physically signed by the trustees provided certain prescribed wording is used. This can apply whether or not the trustees have engaged a professional agent.
This is a welcome relaxation of the procedure and alleviates the issues many Trustees and LPRs have been experiencing in signing such forms in the current circumstances. The change aligns the IHT department more with processes for other taxes within the HMRC (eg self-assessment where agents have been authorised to submit tax returns on behalf of clients for many years without a signed tax return being submitted to HMRC). However, we do feel that the new process for IHT must be approached with caution, especially as the relaxation does not require an independent professional agent being involved. These IHT forms trigger an IHT calculation from HMRC which can then mean that assets are able to be distributed in a certain manner; this is arguably unlike other taxes and could lead to assets being distributed fraudulently to benefit certain individuals without the knowledge of all the LPRs or Trustees, or for a form being submitted that varies from the version agreed.
So, whilst HMRC’s move towards reducing the administrative burden for taxpayers should be welcomed, perhaps signalling a permanent change in certain areas, HMRC must strike a careful balance between pragmatism and mitigating the risk of fraud.