PAC Report Urges Tough Approach On IHT Dodgers

by Robin Pilgrim, LawAndTax-News.com, London

19 July 2005

In its recently released report, the House of Commons Public Accounts Committee (PAC) urged the UK's tax authority to take a tougher line on those who fraudulently seek to avoid inheritance tax.

Arguing that those who commit fraud or are otherwise negligent should be punished more severely than they are at present, the PAC report observed that:

"The average penalty levied after applying abatements has been only 7% of the maximum available, rising to 12% in cases where the Revenue discovered the negligence. The 1999 Finance Act increased the maximum penalties for fraud or negligence in Inheritance Tax."

"The Revenue should...restrict abatements of penalties, not only to encourage representatives to disclose errors voluntarily, but also to deter them from being negligent in submitting inaccurate returns in the first place."

The Committee additionally announced that:

"The 2004 Finance Act introduced new disclosure obligations on those marketing some avoidance schemes, but so far the regulations do not apply to Inheritance Tax schemes. The Revenue currently monitors artificial schemes and seeks to block them through litigation or changes in legislation. The Revenue should consider extending the regulations on disclosure to Inheritance Tax avoidance schemes."

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