Loss Relief on Sale of Land & Ascertainment of Residue

In the current climate many executors are likely to be considering the possibility of selling property below its probate value and claiming loss relief.

For relief to apply the property must be sold by the person liable to IHT, i.e. the personal representatives. If the PRs all but finalise the administration but continue to hold the property, perhaps letting it before eventually marketing and selling it (within the four year period), is it possible HMRC could argue that the residue of the estate had effectively been ascertained prior to the sale so in fact the PRs were merely holding the property on bare trust for the beneficiaries (and the sale was not therefore truly by the PRs)?

I am reasonable confident that HMRC do not take this approach and that in any case the possibility of the relief would itself be enough to demonstrate that residue was not ascertained prior to sale, but I would be interested to know the views of others.

Tobias Gleed-Owen
Hewitsons LLP

Whilst the PRs/Trustees retain legal title any sale (for s191 purposes) would be effected by them irrespective of whether at the time of sale the residue had been ascertained and the PRs/trustees are holding the land qua bare trustees for income/capital gains tax purposes.

If, however, the land is transferred to a beneficiary then the relief is lost as any subsequent sale would then be by the beneficiary.

I’m unaware of any comments by HMRC as to a possible denial of relief where a sale by the PRs is made post conclusion of the administration of the estate.

Malcolm Finney