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HMRC opens compliance checks on thousands of inheritance tax returns each year. The investigation process can be slow, stressful, and expensive — but most investigations are triggered by specific, avoidable factors. This guide explains what draws HMRC's attention, how to present your IHT return in a way that reduces scrutiny, and what records to keep. For an overview of what happens if HMRC does contact you, see our guide on receiving an HMRC IHT compliance check letter.
HMRC uses a combination of automated risk-scoring and manual review to select IHT returns for investigation. The most common triggers are:
This is the most common trigger by a significant margin. HMRC cross- references property valuations against Land Registry sold prices for comparable properties in the same area and period. If the value you have declared appears significantly below what similar properties sold for, HMRC will instruct the District Valuer Service (DVS) to carry out its own assessment.
A discrepancy of 5–10% is within normal valuation uncertainty and is unlikely to prompt further questions on its own. A discrepancy of 20% or more will almost certainly result in a formal query. See our guide on what happens if you give the wrong property value for probate and our guide to valuing property for probate.
Where HMRC has reason to believe gifts were made (for example, because bank statement evidence is requested and shows large transfers) but the IHT403 is blank or incomplete, this is a significant red flag. HMRC also receives information from other sources — for example, Land Registry records showing property transferred at undervalue.
Gifts do not need to result in IHT to be declared — they should be included on IHT403 even if they fall within exemptions. For a full explanation of gift declaration requirements, see our guide on declaring gifts for probate and IHT.
Investment portfolios, business interests, and unusual assets (art, jewellery, classic cars) that appear undervalued relative to HMRC's expectations will attract attention. HMRC uses Shares and Assets Valuation (SAV) specialists for complex asset valuations.
Estates with a high declared value are reviewed more carefully simply because the revenue at stake is larger. Similarly, estates where the declared value is just below a significant threshold (for example, the £2 million RNRB taper threshold, or just below the nil-rate band) may receive additional attention.
Claims for the residence nil-rate band (RNRB), business property relief (BPR), or agricultural property relief (APR) are checked carefully because they can substantially reduce IHT. HMRC will want to see that the conditions for each relief are genuinely met. Incorrect or unsupported relief claims are a common trigger for compliance checks.
Property is where most IHT investigations begin and end. The standard HMRC requires is "open market value at the date of death" — the price a willing buyer would pay a willing seller in an arm's- length transaction, with both parties having reasonable knowledge of the market.
The best protection is an RICS Red Book valuation from a chartered surveyor. This is a formal, written valuation that carries significant weight in any subsequent discussion with HMRC or the District Valuer. If HMRC challenges your valuation, you can negotiate from the strength of a professional report. Without it, you are largely relying on estate agents' letters, which HMRC treats as less authoritative.
If a full RICS valuation is not practical, obtain written letters from at least two local estate agents setting out their estimate of value at the date of death, with reference to comparable sold prices. Keep these on file. HMRC is entitled to request your evidence of valuation at any point during the administration period or for up to 4 years afterwards.
Properties in poor condition can legitimately be valued below similar properties in better condition. The key is to document the condition thoroughly at the date of death — photographs, a surveyor's schedule of condition, or a written description by the estate agent. HMRC accepts condition as a relevant factor in valuation disputes, provided it is evidenced.
Gifts made in the 7 years before death must be declared on form IHT403, even if they are fully exempt. HMRC uses this information to check whether gifts have been disclosed accurately and to verify that the correct exemptions have been applied. A gift that the executor does not declare — but which HMRC later discovers through bank statement review or from another source — becomes a strong indicator of careless or deliberate error.
To find gifts, review all bank statements, building society passbooks, investment records, and correspondence for the 7 years before death. Ask family members directly. Check Land Registry for any property transfers. Even interest-free loans, debt waivers, and assets sold at below market value must be assessed.
Gifts within annual exemptions (£3,000 per tax year, small gifts of up to £250 per person) do not count as chargeable but should still be noted in your working papers in case HMRC asks.
HMRC routinely requests 7 years of bank statements for all accounts held by the deceased during a compliance check. As executor, you should obtain these during the course of estate administration and retain them for at least 4 years from the date the IHT account was delivered (or 20 years if there is any possibility of a deliberate error allegation).
If the deceased held accounts at multiple institutions, request statements from each. Many banks will provide statements for the deceased's accounts upon sight of the death certificate and grant of representation. Keep a complete set of these in the estate file.
Assets held jointly with another person must be included in the IHT return at the deceased's share of the value. This applies even if the surviving joint owner will continue to use the asset without interruption. Common joint assets that are sometimes overlooked include:
Do not simply omit joint assets on the basis that they "pass automatically" to the survivor. Assets that pass by survivorship outside the estate still need to be declared on the IHT return if they have a value — they are simply exempt from IHT under the spouse exemption if passing to a surviving spouse or civil partner.
Foreign assets must be included on the IHT400 even if they are not subject to UK IHT (for example, due to a double taxation treaty or because the estate is below the threshold). HMRC requires a complete picture of the estate. Omitting foreign assets — even if they have no UK tax consequence — is an error that can draw scrutiny. Common foreign assets include overseas bank accounts, property abroad, and foreign investment accounts.
The RNRB (currently £175,000 per person) is available where a residential property is left to direct descendants. The conditions are specific: the property must have been the deceased's residence at some point, and it must pass to a lineal descendant (child, grandchild, etc.) or to a spouse or civil partner. Claims must be supported by clear evidence of ownership and the identity of the beneficiary.
The RNRB is tapered for estates worth more than £2 million (reducing by £1 for every £2 above the threshold). If your estate is near this threshold, double-check the arithmetic carefully.
BPR provides 100% or 50% relief on qualifying business assets. It has specific conditions — the business must be a trading business, must have been owned for at least 2 years, and must not be an investment-heavy business. From April 2026, the first £1 million of BPR-qualifying assets receives 100% relief; above that, the relief is 50%. Ensure you have solid evidence for BPR claims, as HMRC scrutinises them carefully.
APR provides relief on qualifying agricultural property at either 100% or 50% depending on whether the land is owner-occupied or let. From April 2026, APR and BPR are subject to a combined £1 million cap at 100% relief. Evidence of agricultural use, ownership duration, and tenancy arrangements (if applicable) must be retained.
The most effective protection against a compliance check is a comprehensive, accurate, and well-evidenced IHT400. HMRC's risk assessment is partly automated — returns that appear complete, with realistic values and all supplementary schedules properly completed, score better than returns with blanks, unexplained low values, or missing schedules.
Practical steps that reduce investigation risk:
For a guide to completing the IHT400 itself, see our IHT400 form guide.
Even with the most thorough return, HMRC may still raise a query. This does not necessarily mean they believe you have done anything wrong — it may simply be a routine check. The key is to respond promptly and fully, with supporting evidence for every figure queried.
For step-by-step guidance on responding to HMRC, see our guides on how to respond to an HMRC probate query and HMRC querying your property valuation.
For a broader overview of common pitfalls, see our guide to common probate mistakes executors make.
HMRC cross-references declared values against Land Registry comparable data and uses its District Valuer Service for formal revaluations. They also have access to Zoopla, Rightmove, and similar sources. If your declared value is materially below what comparables suggest, they will investigate.
No — HMRC risk-scores returns and selects a proportion for detailed review. Returns with obvious risk factors (low property values, incomplete gift declarations, large relief claims) are more likely to be selected. Returns that appear thorough and well-evidenced are less likely to be investigated.
HMRC has 4 years from the date the IHT account was delivered to open an enquiry for innocent or careless errors. For deliberate errors, the window is 20 years. Keep estate records for at least 4 years after administration is complete.
The District Valuer Service (DVS) is HMRC's in-house property valuation team. When HMRC challenges a property value in a probate return, they instruct the DVS to carry out an independent valuation. You have the right to dispute the DVS figure and can instruct your own RICS surveyor to negotiate with them.
Yes. All gifts in the 7 years before death should be declared on IHT403. If they fall within exemptions (annual allowance, small gift exemption, normal expenditure from income, etc.), note the exemption on the form. A blank IHT403 where gifts were made is a red flag to HMRC; a completed form showing exempt gifts demonstrates transparency and care.
What to do if you make a mistake on your probate application or IHT400. HMRC penalty rules, the C4 corrective account, unprompted disclosure, and executor personal liability explained.
Which gifts must be declared on IHT403, the 7-year rule, potentially exempt transfers, gift with reservation of benefit, annual exemptions, and how to find gifts in the estate records.
What happens if HMRC challenges your property valuation for probate. How the District Valuer Service works, how to negotiate, IHT and interest implications, and how to correct an error via the C4.
How to get a probate property valuation in the UK: RICS Red Book surveyor, estate agent letters, and HMRC's accepted methods. Avoid underpayment penalties. 2026 guide.
What an IHT compliance check is, why HMRC selects returns for review, 7 common triggers, what documents HMRC requests, penalty bands, and how to prepare your response.
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