An inheritance tax warning has been issued due to HMRC’s errors, causing thousands to pay bills before they die. Inheritance tax is typically only charged after a relative passes away with an estate worth more than £325,000. However, bills can also be triggered before death if money is placed in a trust. This rule affects many contractors caught up in the loan charge saga. The loan charge was created in 2017 to combat schemes that involved paying contractors salaries via loans to avoid income tax and National Insurance. Many of these schemes used trusts, leading to inheritance tax implications.
One contractor paid £9,000 in inheritance tax to resolve a £47,000 tax dispute with HMRC. They are now living on a reduced pension with depleted savings. Another contractor shared ongoing distress and fears of further tax demands despite paying inheritance tax in settlement. Conservative co-chair of the Taxpayer Fairness APPG, Greg Smith, called the loan charge a “catastrophic failure” with over 40,000 unresolved cases.
According to Tom Wallace of WTT, inheritance tax has broader applications than many realize. It can apply to situations during lifetime transfers of value, not just assets held at death. Sammy Wilson, DUP MP and APPG officer, has demanded transparency from HMRC and an end to aggressive tactics. HMRC has acknowledged the impact of large tax liabilities on taxpayers’ well-being and expressed commitment to supporting customers in need of extra help.
In conclusion, contractors caught up in the loan charge saga should be aware of potential inheritance tax implications and seek advice to avoid hefty bills. HMRC’s errors have led to significant financial burdens for many, highlighting the importance of understanding tax rules and seeking assistance when needed. Transparency and support from HMRC are crucial in addressing the aftermath of the loan charge debacle and ensuring fair treatment for taxpayers.
