I have an estate where property was transferred by Executors to beneficiary (who was also one of the Executors) and her wife. Value of property was £375,000. There were other properties in the estate, two of which were sold at a lower value than probate and we made a successful claim for loss on sale of land (which also included the declaration that no further sale would be made within four years of death in their capacity as the appropriate person). The owners of the property have now decided they do wish to sell the property, but the price has dropped somewhat and they have asked if they could bring a claim for loss on sale of land for this? Could I have members thoughts on this please. We are still within the four years.
IHTM33012 of the HMRC Inheritance Tax Manual relating to ‘Loss on sale of land: claiming the relief’ states:
Before the relief can be given, a claim must be made by the ‘appropriate person’ IHTA84/S191 (1) (b) ([IHTM33050]
IHTM33050 of the HMRC Inheritance Tax Manual states:
The ‘appropriate person’ is
the person liable for the Inheritance Tax attributable to the value of the interest in land under consideration, or
where there is more than one such person who is liable, the one who is in fact paying the tax, IHTA84/S190 (1).
No relief can therefore be given where a personal representative or trustee accounts for tax and then transfers the land to a beneficiary who then sells at a loss. The beneficiary cannot claim because they are not the ‘appropriate person’, and the personal representative or trustee cannot claim because they have not sold the land.
However, I recall the same question was raised a couple of years ago, at which time respondents stated that relief had been allowed where a loss arose on a sale by beneficiaries. If I correctly recall, the sellers were residuary beneficiaries and therefore were effectively “paying the tax”, hence HMRC allowing the relief.
Despite the relief being granted as the beneficiaries were “paying the tax”, I believe refunds had to be paid to the personal representatives as they physically paid the tax. Not sure how the PRs dealt with the refund.
As HMRC does not seem to apply the relief consistently, I see no reason a claim for relief might not be submitted despite the fact that it would not seem to be sustainable on my reading of the relevant provision.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Just to add an observation, if land was specifically bequeath subject to inheritance tax would I be right in thinking that loss on sale relief could be claimed on a future sale by the beneficiary within the four-year term? Although the personal representative has to physically pay the tax, the beneficiary is clearly liable but perhaps he is not liable to HMRC but
to the PR who is presumably the one who is liable to HMRC. Certainly it would be morally right that the beneficiary should be granted relief but I doubt if morals come into something like this!
Thank you all for your very helpful replies. It’s likely we will have a go at making a claim, but it will only be for half the loss, since the beneficiary / PR gifted half the property to her wife, therefore the wife’s loss, will be treated as a straightforward CGT loss, I assume.