Requirement to Correct (RTC) - Inheritance Tax (IHT) Disclosures and sending additional information to HMRC - updated

We recently contacted HMRC for advice about RTC disclosures for IHT purposes following a query raised with us by a volunteer. The advice that was provided by HMRC is potentially useful for any member making a disclosure involving IHT, so HMRC have agreed that we can share it with our members.

Members should note that the instructions set out below about how to send additional information to HMRC will apply to any disclosure (not just those involving IHT) as additional information will usually need to be sent to HMRC on almost all WDF disclosures (regardless of the type of tax at stake).

This advice also contains instructions regarding what to do if the information you need to send to HMRC by email exceeds the size that the HMRC server will accept.

We asked HMRC for confirmation about how to make a disclosure of IHT liabilities which would be accepted by HMRC. The difficulty is that in order to benefit from RTC extended time limits, an IHT disclosure has to be made via the Worldwide Disclosure Facility (WDF), but there is nowhere on the WDF form (or even any whitespace) to set out the IHT position. 

HMRC have confirmed that the correct process for disclosing IHT liabilities is as follows. 

You should complete the online WDF form in every IHT case and put the amount of IHT due in the ‘income and gains’ box. You should not state a nil liability for income tax and CGT in this box (on the basis there will be a nil liability for these taxes), i.e. you should not submit a nil disclosure.  HMRC accept that this is not the correct characterisation of the liabilities in this case, but there is a box on the same page which can be used to note the fact that the liability in fact relates to IHT. The below screenshot shows the box on the form that should be used.

In addition, further into the form the taxpayer is asked to indicate various considerations that may have come into play when establishing liabilities. On this form HMRC ask you to confirm that IHT issues have been considered. This is highlighted in screenshot below. You will then be able to self-assess the penalty position and include interest on the form itself allowing HMRC to be in the position to start the contract settlement process.

HMRC recognise that interest can be particularly difficult to calculate on IHT cases and so while they would prefer an accurate figure, if providing an estimate of interest is the best way to practically take these disclosures forward, they would encourage taxpayers to make the disclosure on that basis rather than risk finding themselves in a failure to correct position.

HMRC also recognise that members may want to contact HMRC to provide additional information in order to satisfy themselves that they have made a full disclosure to HMRC or explain something in a little more detail. For example, to submit the tax calculation, highlight that interest is estimated or to explain some of the circumstances around how the liability arose. If that is the case, you should write to [email protected] using the Disclosure Reference Number (DRN) and the words ‘Requirement to Correct’ in the subject heading in addition to submitting the WDF form as above.

So to summarise the process looks as follows

1. Complete the WDF disclosure form using the income/gains box and explaining that it is in fact IHT in the description box.
2. Tick the box to show IHT has been considered further through the form
3. Self-assess the penalty position and calculate the interest where possible.
4. Submit the disclosure via Digital Disclosure Service (DDS)
5. Send an email with the Disclosure Reference Number (DRN) and the words ‘Requirement to Correct’ in the title to the OCU mail box if there is further information relating to the disclosure for consideration by HMRC.

HMRC have advised us that the size limit for emails to HMRC’s servers is 10mb, but we understand that in practice it is often not possible to send emails to HMRC which are greater than 7mb.  If you find that the information is too big to email you may choose to send the additional information in more than one email.  If you do not wish to send the information in more than one email you should send the information by post and email HMRC to say that is what you have done.  You should also add a note into the boxes on the online portal to cross refer HMRC to whatever is sent in by post. Physical post (as opposed to electronic) should be sent to

Individual and Small Business Compliance
HM Revenue and Customs
BX9 1LE

This contact address is not to be used to make the disclosure itself unless the person disclosing is instructed to do so by someone in HMRC.

The RTC guidance is quite clear that the 30 September 2018 deadline would only be a notification rather than disclosure deadline in three specific circumstances: using the DDS portal, the CDF process and contacting the enquiring officer if already under enquiry. Therefore it is important that you follow that process to avoid being in a failure to correct position.

To summarise, in cases where it is not possible to email additional information because of the size limit on HMRC’s servers you will have to

1. disclose via the DDS,
2. Send supplementary information to the address above, and
3. Email [email protected] to inform HMRC that the additional information has been sent.

The Unique Taxpayer Reference (UTR) and Disclosure Reference Number (DRN) must be included in all communications so that they can be easily linked. HMRC will then review the supplementary information alongside the disclosure itself before contacting you where necessary.

Members should note that the above instructions will apply to any disclosure (not just those involving IHT) as additional information will usually need to be sent to HMRC on almost all WDF disclosures (regardless of the type of tax at stake).