Ethical matters

Simon Sweetman assesses a complex IHT case for charitable trust. How generous should you be?

The case outlined below was brought to me recently and, having seen the documents, I can confirm that it’s a true story.

A solicitor had submitted an IHT return for a ten year anniversary charge for a discretionary trust. The trust owns shares in two unquoted companies. One of them was a straightforward property rental business, while the other had been a family farm but is now merely renting out part of its land to a horse based (but not farming) business.

No business or agricultural property relief there, thought the tax agent and she submitted the return accordingly.
HMRC eventually responded, agreeing the valuation of the shares but suggesting that Business Property relief was due on the shares in what had once been a farming company. It also suggested completing a D38.At this point of course, doubt creeps in. To do the valuation, HMRC must have looked at the accounts - there hardly seems room to get it wrong. Is there some arcane rule I’ve forgotten? 

This is some £70,000 of tax we’re talking about here. So, believing firmly that HMRC have (for whatever reason) got it wrong, what do you do about it? First of all it seems to me that you have to talk to the client. Most clients at this point will be exceedingly ready to believe that HMRC can’t possibly have got it wrong and you did (so you’re an idiot), but luckily have been saved by Her Majesty’s finest. Therefore, any thought of going back and saying ‘excuse me but are you sure?’ goes out of the window.

Regardless of whatever else has happened, my generosity gene has been shrivelled by the stream of charities ringing up seeking my funds (or more often employing hit men to do it), so I’m all grumpy and need to seek advice.
So, folks, what do your professional ethics tell you here?  Share your answers below.