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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: administration and payment, including the instalment option

Executors submit an IHT account that understates the estate because of carelessness. They tell HMRC about the error voluntarily before HMRC has any suspicion. Under the standard penalties for errors, what is the range of penalty for this behaviour?

The penalty ranges from 0% to 30% of the potential lost revenue. Careless errors have a 30% maximum, and an unprompted disclosure allows a 0% minimum. The 15% minimum only applies where disclosure is prompted.

  1. A0% to 30% of the potential lost revenueCorrect
  2. B15% to 30% of the potential lost revenue
  3. C20% to 70% of the potential lost revenue
  4. D30% to 100% of the potential lost revenue

Explanation

For careless behaviour the maximum penalty is 30%. With an unprompted disclosure the minimum is 0%, while a prompted disclosure would have a 15% minimum. The other ranges relate to prompted careless or deliberate behaviours.

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