Shortfall in Inheritance Tax rises by 50 per cent
The Treasury is said to be losing out, as the gap between the amount of Inheritance Tax (IHT) owed and the amount that is actually collected increases.
According to figures released by HMRC, there has been a 50 per cent rise in the Inheritance Tax gap over the past five years. The amount currently stands at £600 million, whereas in 2012/13 it was £400 million.
Despite the shortfall, 2016/17 saw the amount of Inheritance Tax collected by the Treasury hit a record £4.84 billion, a rise of four per cent on the previous tax year. The increase in the shortfall has risen similarly (4.3 per cent) over the same period.
The director of policy at insurance company, Royal London, said: “Inheritance tax is one of the most complex taxes in the system and there is considerable scope for individuals to organise their affairs in a way which reduces the amount of tax which they pay.
“As IHT revenues have grown, mainly because of the increase in house prices, so the absolute amount of the IHT ‘tax gap’ has also grown. It is very welcome that the Office for Tax Simplification is looking into ways of simplifying IHT, as this should make life easier for taxpayers and also make sure that a higher proportion of the tax due is actually collected.”
Commenting on the new figures, a spokesperson for HMRC said: “The tax gap arises for a number of reasons. Some taxpayers make simple errors in calculating the tax that they owe, despite their best efforts, while others don’t take enough care when they submit their returns.
“Legal interpretation, evasion, avoidance and criminal attacks on the tax system also result in a tax gap. It is impossible to collect every penny that is owed.”