Inheritance Tax Act 1984 section 264

Transfers reported late

Section 264 deals with the tax consequences when a transfer of value is reported late to HMRC, after tax on a subsequent transfer has already been settled.

• When a transfer of value is not reported within the required deadline and is only discovered after tax on a later transfer has already been accepted as paid in full, additional tax may be charged on the earlier transfer
• The additional tax equals the difference between what should have been charged on the later transfer (had the earlier transfer been known about) and what was actually accepted — this shortfall is charged against the earlier transfer, not the later one
• Where multiple unreported earlier transfers are discovered, the additional tax is apportioned between them based on their relative values, and where one earlier transfer has already been settled before others come to light, it is protected from further charges
• Where the earlier transfer would have qualified for an exemption (such as the nil-rate band), but that exemption was already used against the later transfer, the exemption is reallocated back to the later transfer and the earlier transfer loses the benefit of it