IHT interest on instalments

Good morning All,

We represent an executor where the estate consists of free estate, gifts and trust assets. A significant proportion of the estate is agricultural land for which we are claiming APR. The IHT is circa £4.2m and we have elected to pay tax
in instalments. The executor has paid the tax due on application and made an advance payment of £1.6m to cover the instalments due up to 2023. The aim was to reduce interest accruing.

We have advised the executor that HMRC shall pay 0.50% interest upon the £1.6m held on deposit by HMRC. They shall transfer the money automatically as the instalment dates fall due.

We have further advised the executor that HMRC charge 3.25% on the unpaid interest. The executor feels that this is inequitable and the deposit money should be transferred immediately thereby reducing the capital value of unpaid tax which
incurs the 3.25& interest.

We do not wish to elect for assets to be removed from instalment until the district valuer has completed their report and relief has been granted. Until then we cannot think of anything else which could be done by the executor to reduce
the interest. Does anyone have any idea or experience of this situation please?

The executor now wishes for the money on deposit to be returned.

Any suggestions much appreciated.



kathryn harwood
napthens solicitors

Is it not the case that whilst the money is held and used against future instalments the 0.5% does not apply but on the other hand the 3.25% will not be charged?

Nigel Scase
Greene & Greene

I was under the impression that if you pay instalments early HMRC use the full amount towards the outstanding instalments and you cannot have it repaid. If that is right then you may not have the problem you think you have. If I am wrong then, if you can retrieve the money for the instalments you have paid early then you may be able to solve your problem if you buy some certificates of tax deposit.

Paul Davies

Unfortunately Certificates of Tax deposit are no longer available.

Nigel Scase
Greene & Greene