HMRC Inheritance Tax Investigations Are Rising: Six Common Mistakes and One Valuation Issue Many Families Miss

A recent Which? article highlighted six common mistakes that can trigger an HMRC inheritance tax investigation, including undervalued property, poor records of gifts, gifts with reservation of benefit and undeclared overseas assets. Those are all important risks.

However, in our experience, some of the most significant disputes arise from a seventh factor that receives far less attention: the valuation of minority interests in land, family businesses and other complex assets.

Why are HMRC inheritance tax investigations increasing?

According to recent figures reported by Which?, HMRC opened 4,940 formal inheritance tax investigations during the 2025/26 tax year, an increase on the previous year. Thousands of additional estates were also referred for review before a formal investigation was opened.

The increase is unsurprising. More estates are being caught by inheritance tax as asset values rise and tax thresholds remain frozen. HMRC is also under pressure to improve tax compliance and recover underpaid tax.

For executors and beneficiaries, an HMRC enquiry can lead to delays, additional professional fees and unwelcome uncertainty at an already difficult time.

The six risks highlighted by Which?

The Which? article identified six common areas that can attract HMRC scrutiny.

1. Undervaluing property

Property is often the most valuable asset in an estate. HMRC may question valuations that appear low compared with local market evidence or where insufficient professional evidence has been obtained.

2. Poor records of lifetime gifts

Executors are required to disclose relevant lifetime gifts. Missing or incomplete records can make this difficult and may increase the likelihood of questions from HMRC.

3. Gifts with reservation of benefit

A gift may remain taxable if the donor continues to benefit from the asset after giving it away. The classic example is a parent gifting a house to their children but continuing to live there rent-free.

4. Missing assets

Old bank accounts, investments, business interests and valuable personal possessions are sometimes overlooked. An incomplete inheritance tax return can create difficulties for executors and attract further scrutiny.

5. Inconsistent information

Discrepancies between valuations, financial records and supporting paperwork can prompt HMRC to seek clarification.

6. Overseas assets

Cross-border estates are becoming increasingly common. Overseas property, bank accounts and investment assets may all need to be considered when preparing an inheritance tax return.

These are all sensible warnings. However, for many of the families we advise, a different issue often proves more significant.

The risk Which? does not emphasise: valuation disputes

In our experience, some of the most substantial inheritance tax disputes arise not because information is missing, but because HMRC disagrees with the value placed on an asset.

This frequently affects:

• minority interests in land;
• jointly owned property;
• private company shares;
• family investment companies;
• partnership interests; and
• trust assets.

These assets can rarely be valued using a simple formula. Instead, they often require specialist valuation advice and are more likely to attract detailed HMRC scrutiny.

Why minority interests in land matter

This issue is particularly relevant to many of our clients.

It is increasingly common for property and land to be owned by multiple family members. For example:

• siblings may inherit a property together;
• parents and children may co-own investment property;
• farming families may hold land in different proportions;
• family members may own interests in a larger property portfolio.

A common misconception is that a share of a property is worth the same proportion as the whole property. For example, if a property is worth £1 million, it is often assumed that a 25% share must be worth £250,000. In practice, the position can be far more complicated.

HMRC's own guidance recognises that specific valuation principles apply to undivided shares in land. The value of a minority interest may be affected by factors such as control, marketability, occupation rights and the practical ability to realise value from the asset.

Why this is important for inheritance tax

Valuation differences can have a significant impact on the amount of inheritance tax payable.

Where an estate contains substantial landholdings, investment property or business interests, disagreements over valuation can easily involve tens or even hundreds of thousands of pounds.

This is one reason why HMRC's Shares and Assets Valuation specialists and the Valuation Office Agency play such an important role in inheritance tax compliance work. HMRC's own manuals include detailed guidance on valuing undivided shares in property and unquoted business interests.

For families with significant property or business assets, obtaining robust valuation evidence at an early stage is often far less expensive than dealing with a prolonged HMRC enquiry later.

How can families reduce the risk of an HMRC enquiry?

There is no guaranteed way to avoid an HMRC investigation, but sensible planning can reduce the risk considerably.

We generally recommend:

• keeping clear records of lifetime gifts;
• reviewing arrangements that may constitute a gift with reservation of benefit;
• maintaining an up-to-date schedule of assets and liabilities;
• identifying overseas assets at an early stage;
• obtaining professional property valuations where appropriate; and
• seeking specialist advice where the estate includes minority interests in land, business assets or trusts.

For executors, careful preparation of the inheritance tax return and supporting evidence is equally important.

Final thoughts

The recent Which? article is a useful reminder that HMRC is paying close attention to inheritance tax compliance. The six issues it identifies are all worth considering when planning your estate or administering the estate of a loved one.

However, the most challenging inheritance tax issues are not always the most obvious ones. For landowners, farming families, business owners and those with complex family wealth structures, valuation can be every bit as important as record-keeping.

In particular, minority interests in land, jointly owned property and family business assets require careful consideration.

How Tozers can help

Taking specialist advice early can help minimise the risk of HMRC challenge and ensure the correct amount of inheritance tax is paid. Contact us today to discuss how we can support you.

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