I am dealing with an estate where the deceased died owning a half-share in a property in his free estate. The other half was held in a trust in which the deceased had a life interest (and which is aggregated with the deceased’s estate for IHT purposes by virtue of section 49 IHTA 1984). This was a trust settled many years ago by a relative of the deceased.
On submission of the IHT400 and IHT100, a discount was applied to the values of the property interests by both the executors and trustees on the basis that the usual disadvantages of co-ownership would apply here - e.g. neither party would have had the power to force the other to sell.
HMRC are resistant to this argument and the case officer has referred to the IHT manual which suggests that land held partly in a deceased’s free estate and partly in a life interest trust should be valued as a whole and not as two shares (IHTM15071 and IHTM09712).
In both of the above extracts from the manual, no authority is cited, but HMRC do refer to some authorities in IHTM09714 (Att-Gen of Ceylon v Mackie [1952] 2 All ER775 and Gray v IRC [1994] STC 360), although both cases could be distinguished on the facts.
Do members have any practical experience of negotiating this point with HMRC? Is it a complete non-starter? The inheritance tax at stake isn’t huge in the context of the wider estate, but the executors would like some comfort that they are right not to pursue this further.
Thank you in advance
Kate Buchanan
Taylor Wessing LLP