Woman jailed for trying to dodge £500,000 inheritance tax bill
Theresa Bunn, 56, inherited £1.5m but told the taxman the sum was £285,000. She has been sentenced to two years in prison
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HMRC now appears to be tightening the net on families trying to avoid death tax
4:46PM GMT 10 Mar 2015
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A 56-year-old woman has been sentenced today to two years in jail having lied to HMRC about the value of assets she inherited after the death of her aunt. She claimed to have inherited £285,000 when the sum was in fact £1.5m.
She also lied about financial gifts made to her by her aunt before her death, the taxman said.
HMRC has issued details of the case and conviction to deter others from understating inheritances in order to avoid death duties.
Currently estates below £325,000 are not subject to the tax. Assets above that threshold are taxed at 40pc.
Married couples or civil partners can add their two "nil rate bands" together, giving a joint allowance of £650,000.
HMRC said that Ms Bunn, from Hassocks, Sussex, confessed, following an investigation, that in addition to understating the value of her inheritance she also "failed to declare substantial cash gifts from her aunt while she was alive".
Only gifts within certain strict limits are exempt from inheritance tax, unless the person who makes the gifts lives on afterwards for at least seven years.
As a result large, one-off gifts made shortly before the donor's death should also fall within the estate for the purposes of calculating inheritance tax.
It appears in Ms Bunn's case these rules were not followed.
>> Comment: 'How the Tories can raise inheritance tax threshold to £1m'
HMRC said it had been prompted to investigate her case "after officers discovered she had been financially supporting a friend and using her friend’s bank accounts to hide money and evidence of her spending from her family".
An HMRC director, Stuart Taylor, said she "lied purely to avoid paying tax".
He added: "The vast majority of us pay what is due, when it is due, but HMRC will not tolerate tax fraud and will investigate those we suspect of operating outside the law.”
The inheritance tax take has been creeping up in recent years as house prices and stock markets have recovered. Few convictions have been publicised in this way, however, with accountants commenting that HMRC's highlighting the case was a sign it was "taking a harder look" at families who may be trying to understate inheritances to avoid tax.
Patricia Mock, personal tax expert at Deloitte, said: "I'm not aware of an inheritance tax case where HMRC has chosen to publicise the outcome of an investigation. But we have seen the trend of naming and shaming taxpayers where other types of tax avoidance are involved."
Although HMRC did not spell this out, it is likely Ms Bunn was the executor of her aunt's will as well as its main beneficiary. If so it would have fallen to her to draw up a list of her aunt's assets.
It is not necessary for a solicitor to handle this process, although in the case of most families, especially where valuable estates are concerned, a solicitor usually is involved.
There are a number of ways of legitimately reducing a potential inheritance tax bill, however.
Many involve the careful structuring of the ownership of property and other assets. This was the strategy thought to have been adopted by Tony Benn's family.
Another ploy involves beneficiaries of wills re-writing the wills in order to pass assets on to other family members. This was the strategy adopted by Ed Miliband's family, as described here.
Only gifts within certain strict limits are exempt from inheritance tax, unless the person who makes the gifts lives on afterwards for at least seven years.
As a result large, one-off gifts made shortly before the donor's death should also fall within the estate for the purposes of calculating inheritance tax.
It appears in Ms Bunn's case these rules were not followed.
>> Comment: 'How the Tories can raise inheritance tax threshold to £1m'
HMRC said it had been prompted to investigate her case "after officers discovered she had been financially supporting a friend and using her friend’s bank accounts to hide money and evidence of her spending from her family".
An HMRC director, Stuart Taylor, said she "lied purely to avoid paying tax".
He added: "The vast majority of us pay what is due, when it is due, but HMRC will not tolerate tax fraud and will investigate those we suspect of operating outside the law.”
The inheritance tax take has been creeping up in recent years as house prices and stock markets have recovered. Few convictions have been publicised in this way, however, with accountants commenting that HMRC's highlighting the case was a sign it was "taking a harder look" at families who may be trying to understate inheritances to avoid tax.
Patricia Mock, personal tax expert at Deloitte, said: "I'm not aware of an inheritance tax case where HMRC has chosen to publicise the outcome of an investigation. But we have seen the trend of naming and shaming taxpayers where other types of tax avoidance are involved."
Although HMRC did not spell this out, it is likely Ms Bunn was the executor of her aunt's will as well as its main beneficiary. If so it would have fallen to her to draw up a list of her aunt's assets.
It is not necessary for a solicitor to handle this process, although in the case of most families, especially where valuable estates are concerned, a solicitor usually is involved.
There are a number of ways of legitimately reducing a potential inheritance tax bill, however.
Many involve the careful structuring of the ownership of property and other assets. This was the strategy thought to have been adopted by Tony Benn's family. Another ploy involves beneficiaries of wills re-writing the wills in order to pass assets on to other family members. This was the strategy adopted by Ed Miliband's family, as described here.
