Amid all the talk of Panama papers and offshore tax havens, it can be easy to lose sight of the fact that when it comes to taxation there are some things which should be taxed and some which shouldn’t. Understanding the rules can therefore help people to avoid falling into the overpayment trap in which tax is taken when it need not be.
One such example in respect of inherited retirement funds came to light recently. With effect from 6 April 2016, those dying before the age of 75 can pass certain types of pension pots on to inheritors free of income tax. Tax is payable on such transfers for those dying after the age of 75. However, an investigation has revealed that in some circumstances, where the pension company has provided HMRC with details of the transfer in accordance with normal procedures, HMRC has raised a tax demand.
At the time of writing information in respect of the number of those affected is unclear but pension providers have been ordered to stop providing information in respect of death benefits to HMRC until the problem has been resolved. The danger of issues such as this arising is that those who are grieving may be all too ready simply to accept the tax bill rather than investigate the regulations and this could affect their own income tax and investment decisions.
If you would like to speak to a tax adviser about inheritance tax, please contact Newshams Tax Advisers on 0800 211 8657 or email us at firstname.lastname@example.org.