Inheritance Tax Act 1984 section 240

Underpayments

Section 240 sets out the rules governing what happens when too little inheritance tax has been paid on a chargeable transfer, including the time limits within which HMRC can pursue recovery of underpaid tax.

• Any underpaid inheritance tax is payable with interest, regardless of whether the amount originally paid matched the figure stated in HMRC's notice of determination.
• Where tax has been paid in accordance with a properly submitted account and accepted in full satisfaction, HMRC generally has a six-year time limit to recover additional tax, running from the later of the date of final payment or the date the tax became due.
• The six-year time limit is extended to 20 years where the underpayment was brought about deliberately, or where the taxpayer failed to notify HMRC of a monitored promoter's reference number in relation to a tax avoidance arrangement.
• Where no proper account was delivered but the underpayment was not deliberate, HMRC has a longstop of 20 years from the date of the chargeable transfer to bring recovery proceedings, after which the liability and any HMRC charge are extinguished.