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Failure to Disclose Gift Costs £100,000
A man who received a significant gift from his father before he died but failed to declare it for inclusion on the Inheritance Tax (IHT) return to HM Revenue and Customs (HMRC) after his father's death has been fined £87,000 as a result.
The estate was valued at approximately £3 million and the executors wrote to the beneficiaries asking if they had received any gifts from the deceased during his lifetime.
Normally, significant gifts made in the seven years prior to death have to be included in the estate valuation for IHT purposes.
No such gifts were declared to HMRC. However, a tip-off subsequently revealed that one of the dead man's sons had an undisclosed Swiss bank account which emanated from a transfer from his father's Swiss account (also undisclosed) shortly before he died. The interest earned on the account was also not included on either man's tax return.
The son blamed the omission on the executors of the estate, arguing that he did not know the amount of money in the Swiss account, believed that it was not subject to UK IHT and had not been clearly told of his need to disclose any gifts. He described as 'gobbledygook' the letter from the executors to the beneficiaries asking if there had been gifts made to them before his father's death.
HMRC rejected the son's arguments and levied tax and penalties on him of more than £100,000.
The First-tier Tribunal also rejected his arguments, confirming the penalty assessed.