A died 31/12/2019 having owned qualifying BPR assets for less than a year. The estate devolved to an interest in possession trust with the spouse as the life tenant. This was an IPDI and therefore the accrued ownership was protected and spouse survived for the remainder two year period.
In October 2020 the qualifying BPR company entered into a 1:1 rights issue. The offer was extended to the executors of the estate as there was not at that stage a Grant of Probate. The issue date for the shares under the rights issue would revert to the original purchase date and the shares would, via the IPDI have met the two year requirement. In order to take up the rights issue one of the executors (son of the deceased) loaned the estate the funds as assets of the estate could not be used without the Grant. The value of this loan was included as a deduction in the estate as a debt by the solicitor but HMRC have challenged the deduction on the basis of IHTM 28020. There would have been sufficient assets in the estate to take up the rights issue had a Grant been obtained. Clearly the legislation was not targeted at this circumstance. Any views other than appealing to the good nature of HMRC?
As at the date of death of A, the shares then held included the value of the future issue of the nil paid rights.
That the son then loaned to the estate the funds to enable the rights issue to be taken up, in my view does not affect the estate as at the date of death as the liability neither existed as at that date, nor had been contracted by the deceased.
If the question relates not to the death of A, but to the subsequent death of his widow, IHTM 28020 does look to be relevant as the loan was for a specified purpose.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Assuming this is the widow’s death, s.162B seems squarely on point. There is no motive/intention test in there. It’s bad luck I grant you but I can’t see HMRC being so generous as to waive the restriction.