What Does an HMRC IHT Compliance Check Letter Mean?

What Is an IHT Compliance Check?

An IHT compliance check is HMRC's formal process for verifying that an Inheritance Tax return (IHT400 or IHT205) is accurate and complete. HMRC has the legal power under the Inheritance Tax Act 1984 and the Finance Act 2008 to open enquiries into IHT returns, request supporting documents, and — where it finds errors — issue amended assessments and charge penalties.

A compliance check is initiated by a letter from HMRC Compliance (usually from the Nottingham or Worthing offices). The letter will typically reference a specific aspect of the return — a property valuation, a gift, an allowance claim — and ask you to provide supporting evidence.

The tone of the letter is usually formal but not accusatory. HMRC will refer to its powers under specific legislation and set a deadline for your response. Read it carefully — the specific documents or information requested will be listed, often in a numbered schedule.

Compliance Check vs Enquiry vs Formal Investigation

These three terms describe different levels of HMRC scrutiny, and understanding the distinction matters:

• Compliance check (routine): HMRC asks for supporting evidence or clarification on a specific issue in the return. Most resolve within a few months once documents are provided. This is the most common category and most executors who receive one resolve it without further escalation.
• Enquiry (formal):A more structured process where HMRC formally opens an enquiry under its statutory powers. The letter will use language such as "I am now opening an enquiry into the IHT account." HMRC has more extensive information-gathering powers and the process takes longer — typically 6–24 months.
• Investigation (serious):Reserved for suspected fraud, deliberate tax evasion, or serious inaccuracies. HMRC's Fraud Investigation Service may be involved. If you receive a letter referring to potential fraud or criminal investigation, take professional advice immediately.

In the vast majority of estates handled by executors, a compliance check letter means category one — a request for supporting evidence. Responding promptly and thoroughly almost always resolves it.

Common Triggers for a Compliance Check

HMRC uses risk-based selection to decide which IHT returns to check. The most common triggers are:

• Property values below market rate.If the declared value of a property appears low against Land Registry or automated valuation model (AVM) data, HMRC's systems flag it. This is the single most common trigger. See our guide on HMRC querying a property valuation for detailed guidance.
• Large estates. The larger the estate, the more scrutiny the return receives. Estates above £1 million, or those claiming significant reliefs that reduce a notionally large estate below the nil-rate band, attract particular attention.
• Undeclared or undervalued gifts. HMRC cross-checks bank records and other data against declared lifetime gifts (PETs and CLTs). Gifts made in the 7 years before death must be declared on the IHT400. Missing or incomplete gift records are a common trigger. See our guide on the 7-year gifting rule.
• Residential nil-rate band (RNRB) claims. The RNRB (up to £175,000) is a relatively recent relief with specific qualifying conditions. HMRC checks that the property was directly inherited by a direct descendant and that the estate does not exceed the £2 million taper threshold.
• Business Property Relief (BPR) or Agricultural Property Relief (APR) claims. These are high-value reliefs (up to 100% of the asset value) that HMRC scrutinises carefully. Qualifying conditions — trading status, ownership period, use — must all be evidenced.
• Jointly owned assets. How joint tenancy and tenancy in common assets are valued and reported is a frequent area of complexity. See our guide on joint bank accounts when one owner dies.
• Inconsistencies between the IHT400 and other records. HMRC can access data from other government departments — DVLA, pension records, Companies House — and will flag inconsistencies.

What the Letter Typically Asks For

HMRC's compliance check letter will usually request some or all of the following, depending on the trigger:

• Property valuation evidence: RICS surveyor report, estate agent valuations (if a formal survey was not obtained), or comparable sales evidence.
• Bank statements: often for the 7 years before death, to verify gift records and identify undeclared transfers.
• Gift records: documentation of all gifts made in the 7 years before death, including recipient details, amounts, and dates.
• Evidence of relief claims: for BPR or APR, trading accounts, land registry entries, farming agreements, or company documents.
• Evidence of RNRB eligibility:confirmation of the direct descendant's identity and the nature of the inheritance (direct inheritance, not via a non-qualifying trust).
• Pension death benefit information: particularly relevant as pension rules change in 2027. See our guide on pensions and inheritance tax from 2027.
• Life insurance policy details: whether policies are written in trust (and so outside the estate) or not. See our guide on life insurance and the estate.

Your Obligations and Response Deadlines

The letter will specify a response deadline — usually 30 days from the date of the letter. HMRC will generally grant a reasonable extension if you write promptly explaining that you need more time to gather documents. Do not simply ignore the deadline — if you fail to respond, HMRC can:

• Issue a determination of the IHT due on its best estimate.
• Apply to the tribunal for a statutory information notice requiring you to provide documents.
• Charge penalties for failing to comply with an information notice (up to £300 initially, with daily penalties of up to £60 thereafter).

If you need more time, telephone the HMRC Inheritance Tax team (0300 123 1072) or write to the address on the letter explaining the position. A short extension (2–4 weeks) is almost always granted for straightforward requests.

How to Prepare a Response

A well-organised response is the fastest route to closing the compliance check. Follow these principles:

1. Read the letter carefully and list precisely what is being asked. Number your responses to match the questions in the letter.
2. Gather documents methodically. Retrieve bank statements, insurance policies, property survey reports, or business accounts as required. Keep originals and send copies only.
3. Be factual and precise. Answer what is asked — nothing more, nothing less. Do not volunteer additional information that could open new lines of enquiry.
4. Acknowledge any genuine errors promptly. If the compliance check reveals that you made an honest mistake — an incorrect property value, a missed gift — correct it straightaway. HMRC treats voluntary disclosure of errors more leniently than errors discovered through investigation.
5. Keep full copies of everything you send. Use recorded delivery if sending hard copies. Retain copies of all correspondence permanently.

For a detailed step-by-step on writing the response letter, see our guide on how to respond to an HMRC probate query.

When to Use a Tax Adviser or Solicitor

Many compliance checks can be handled by the executor directly, without professional help. You should consider engaging a specialist tax adviser or probate solicitor if:

• The compliance check relates to a complex area — BPR, APR, RNRB taper, discretionary trusts, or foreign assets.
• The potential IHT at stake exceeds £10,000 (the cost of advice is easily justified).
• HMRC is proposing a formal enquiry rather than a routine information request.
• The letter references deliberate errors, fraud, or offshore assets.
• You are unsure what the letter means or whether you are at risk of penalties.

A specialist tax adviser (typically a chartered tax adviser or CTA) can handle correspondence with HMRC on your behalf, negotiate on your behalf with the DVS for property valuations, and manage the settlement process. Fees for handling a compliance check vary — expect £500–£3,000 depending on complexity.

If you want to understand whether doing probate yourself was the right call in your situation, see our guide on DIY probate vs using a solicitor.

Penalties: What HMRC Can Charge

HMRC's penalty regime for IHT errors is based on the behaviour that led to the error, not just its size:

• Reasonable care (no penalty): If you took reasonable steps to get the return right — obtained professional valuations, declared all assets you were aware of — and an error arose despite this, HMRC should not charge a penalty. Errors of judgment, not negligence, attract no penalty.
• Careless error (up to 30%): If you failed to take reasonable care — used an informal valuation rather than an RICS report for a high-value property, failed to check whether gifts had been made — HMRC can charge up to 30% of the lost tax. This is the most common penalty category.
• Deliberate error (70–100%): If HMRC concludes an error was deliberate — knowingly understating an asset value, omitting a known gift — penalties can reach 70% of the lost tax for a deliberate error, or 100% for a deliberate and concealed error.

Penalties are reduced for voluntary disclosure and co-operation. An executor who promptly corrects an error and co-operates fully will receive a substantially reduced penalty compared to one who delays or provides misleading information.

Interest on Unpaid IHT

Where a compliance check reveals that additional IHT was due, HMRC will charge interest from the date the tax was originally payable (6 months after the end of the month of death) to the date of payment. The interest rate is set at 2.5 percentage points above the Bank of England base rate (currently approximately 7.75% per year — check HMRC's website as it changes with base rate movements).

For broader context on how IHT timing and interest interact, see our guide to probate delays and IHT interest.

The Settlement Process

Once HMRC has reviewed your response, one of three outcomes follows:

1. Compliance check closed. HMRC accepts your evidence and confirms the original return was correct. No additional tax or interest is due. You will receive a closure letter.
2. Amended assessment agreed. HMRC and you agree that additional IHT is due (because a value has been revised or an error corrected). HMRC issues a revised calculation. You pay the additional tax plus interest. The case closes.
3. Dispute continues. You and HMRC cannot agree on the correct value or the application of a relief. The case proceeds to the First-tier Tribunal (Tax Chamber) for independent determination. This is relatively rare — most cases settle by agreement at stage one or two.

Frequently Asked Questions

Does receiving a compliance check mean I did something wrong?

Not necessarily. HMRC opens compliance checks routinely on a proportion of IHT returns, particularly for large estates or where an automated system flags a potential discrepancy. Many compliance checks result in no additional tax being due — they simply confirm the return was correct.

Can probate be granted while a compliance check is ongoing?

Yes, in most cases. An IHT compliance check does not prevent the Probate Registry from issuing a Grant of Probate. Probate and HMRC IHT compliance are separate processes. However, if HMRC has not yet issued an IHT421 (estate confirmation for probate), this can delay the application. See our guide on probate delayed by HMRC.

What happens if the estate has already been distributed?

If a compliance check reveals that additional IHT was due and the estate has already been distributed to beneficiaries, the executor is personally liable to pay the additional tax. This is one reason why executors should retain estate funds until HMRC has confirmed the IHT account is closed. See our guide on executor personal liability.

How long does an IHT compliance check take?

A straightforward compliance check — where HMRC asks for a valuation report and you provide one — can resolve in 4–8 weeks. A more complex check involving multiple issues, business relief, or a property valuation dispute may take 6–18 months. A formal enquiry can take 2 or more years if it proceeds to tribunal.

Can I appeal if HMRC decides I owe more tax?

Yes. You have 30 days from HMRC's decision to appeal to the First-tier Tribunal (Tax Chamber). You can also request a statutory review by HMRC's review team before proceeding to tribunal. Most appeals settle by agreement before a tribunal hearing.

Related Guides

• HMRC Queried My Property Valuation: What to Do
• How to Respond to an HMRC Probate Query
• IHT400 Form Guide
• Inheritance Tax Basics
• Probate Delays and IHT Interest
• Paying IHT Before Probate
• Executor Personal Liability
• Complete UK Probate Guide 2026