Claim for Loss Relief by "appropriate persons"

I should be grateful for the thoughts of the forum on the following.

I have an Estate in which a property was gifted by Will to family beneficiaries, subject to Inheritance Tax. The family paid the requisite tax to HMRC, with no Estate funds being used.

The property was then transferred to the beneficiaries, before subsequently being sold by them at a significant loss. We have attempted a claim for loss relief by HMRC, but it has been rejected on the basis that the property was transferred before the sale, hence the Executor cannot claim as the “appropriate person”. They have quoted s.190(1) IHT84 and IHTM33050.

In normal circumstances I would agree with HMRC’s viewpoint, but my question is whether any difference comes from the fact that the beneficiaries paid the tax in the first place, not the Executor. s.190(1) IHT84 states that: “the appropriate person” [is] in relation to any interest in land comprised in a person’s estate immediately before his death, means the person liable for [inheritance tax] attributable to the value of that interest or, if there is more than one such person and one of them is in fact paying the tax, that person (my emphasis). I am therefore questioning the value of an appeal with HMRC.

Has any member of the forum succeeded (or indeed failed) with an appeal in similar circumstances?

Patrick Brennan
Blandy & Blandy LLP

Wouldn’t it be more appropriate to claim for a reduction in the death Estate value of the property (provided the sale was within the relevant time limits) and then claim a partial refund of the IHT paid. This will reduce the base cost for the beneficiaries such that they don’t realise a loss, if as assumed, they don’t have any other gains against which to set the loss.

Maxine Higgins
Citroen Wells

I thought members might be interested to hear that my claim to HMRC that the beneficiaries (who paid the tax at the outset) were the “appropriate persons” eventually succeeded, meaning that a tax rebate was issued by HMRC.

Patrick Brennan
Blandy & Blandy LLP

Hi Max,

Revisting this point - I have a situation where shares have been sold by remainderman of life interest trust after death of life tenant. LT paid IHT on value of shares in Estate but remainderman have subsequently sold for a significant loss. Could we do IHT35 form to revalue shares in Estate and ‘adjust’ probate value for resulting CGT purposes?

Lucy Orrow CTA TEP
Lambert Chapman LLP

I don’t think so.

Had the sale been effected by the trustees following the LT’s death (who would have been liable to pay any IHT arising on the value of the trust assets in which the LT’s interest subsisted) then an IHT relief claim would have been possible.

The remainderman is not an “appropriate person” as he is not liable for any IHT arising on the assets in the trust in respect of which the interest of the LT subsisted [IHTA 1984 s 178(1)].

Malcolm Finney

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Lucy see my reply to Parveen’ question which is similar to yours.

Patrick Moroney
BWL Solicitors

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