HMRC delayed a £153,500 inheritance tax rebate for more than a year

A UK taxpayer has reported that HM Revenue & Customs (HMRC) confirmed an inheritance tax (IHT) rebate of £153,500 but then delayed the actual payment for more than a year, according to a Guardian consumer report. The family said probate delays and provisional valuations by a solicitor forced an upfront IHT payment and left an elderly taxpayer short of savings.

Details in the letter to the newspaper show the executor paid the tax to avoid interest on late payments, only to discover the solicitor’s estimate had been significantly overstated. The family applied for a refund; HMRC acknowledged the overpayment after eight months but the funds were not transferred for several additional months. HMRC later attributed the hold-up to a handling error. Practical guidance and the specific claim forms for such refunds—most commonly IHT35 for shares and IHT38 for land and property—are published on GOV.UK with deadlines and documentation requirements.

The squeeze is both operational and financial: HMRC’s internal guidance explains how interest supplements are calculated for delayed repayments, but critics note that the interest HMRC pays on overdue refunds is typically below the Bank of England base rate, while penalties and higher interest rates can apply to late taxpayer payments. That asymmetry has prompted complaints, particularly where beneficiaries or executors have liquidated assets or used savings to cover an initial IHT liability.

In the broader context, a rise in claims for overpaid IHT has coincided with market volatility and property market adjustments, producing a meaningful volume of refund applications in recent periods. Industry coverage and specialist probate outlets report thousands of refund claims and hundreds of millions of pounds reclaimed in recent tax years, underscoring administrative pressure on HMRC’s processing capacity.

Tax advisers say HMRC needs clearer timetables and faster operational responses to reduce financial hardship for claimants. Executors are urged to file the correct IHT corrective forms promptly and to keep detailed sale and valuation records to support loss-on-sale claims. If processing backlogs persist, the market could see sustained reputational costs for the tax authority and increased calls from MPs and consumer groups for stronger service guarantees.