Loss on Sale form IHT38

Trusts Discussion
1

Hello

I am dealing with an estate where the sale value of the property has fallen by £7,000 from the probate value ie from £325,000 to £317,000. IHT was payable on the estate. I have considered HMRC form IHT38 and paragraph 7 of the Notes. It states that ‘You cannot claim relief if the sale price differs from the value on death by less than £1,000 or 5% of the value on death, whichever is lower’.**

My loss represents about 2.15% fall. Does this mean we cannot claim for this loss because it is less than 5%?

A representative at HMRC IHT checked with their technical team based on these figures and told me that I should complete IHT38 but I cannot get my head around the above wording because to me it seems the fall is too low.

Or, does it mean that £1,000 is the lowest amount you can claim for?

I would be grateful for any replies.

2

IHTA 1984 s191 (2)

Subsection (1) above shall not apply to an interest if its sale value would differ from its value on death by less than the lower of—

(a)£1,000, and

(b)5 per cent of its value on death.

5% of £325,000 is £16,250. £1,000 is lower than £16,250 so a claim can be made. For the 5% to be lower than £1,000 the sale price would need to be less than £20,000. Presumably it was still possible to sell a property for this amount in 1984 and the figures have never been amended.

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3

Thank you for clarifying.