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Getting the green light from HMRC – when can beneficiaries get their inheritance
One of the questions we frequently get asked is when inheritance can be distributed to the beneficiaries of a taxable estate. One of the key steps is to obtain the green light from HMRC.
In a taxable estate, personal representatives must be satisfied that HMRC will not raise queries about the IHT 400 application before making final distributions. This is a sensible approach as the personal representatives could be held personally liable for monies owned if they distribute without ensuring matters are finalised with HMRC.
When submitting the IHT400 to HMRC, we always aim to be as thorough as possible to ensure that the application goes through as smoothly as possible. However, HMRC are entitled to raise queries, and it is common for them to refer a valuation of land to the District Valuer’s Office for confirmation. Accordingly, we are never able to guarantee to personal representatives that HMRC will not raise any queries.
Getting the green light from HMRC has been difficult in the past as the Inheritance Tax department often has a large backlog of cases to deal with. HMRC have amended their processes over the last few years in an attempt to assist personal representatives.
The process is now as follows:
- Personal representatives submit the IHT400 to HMRC and pay the inheritance tax due.
- HMRC aim to conduct an initial review of the application to confirm that the tax the personal representatives claim to be due has been paid. They aim to do this within 20 working days of receipt of the application.
- Once satisfied that the inheritance tax has been paid, HMRC will stamp the IHT421 form and forward this directly to the Probate Registry to allow the Grant of Probate/Letters of Administration to be issued.
- HMRC then have a further 12 weeks from the date they stamp the IHT421 to conduct a more detailed review of the application.
This process helps to strike a balance between allowing HMRC time to thoroughly review applications whilst also preventing unnecessary delay in progressing the probate application.
After the 12-week period has passed, personal representatives can assume that HMRC does not have any queries to raise and can begin to distribute the estate if in a position to do so.