Do hmrc seek to charge iht on accrued interest on national savings certificates on a 10 year charge?
Simon Northcott
I do not know what HMRC do in the circumstances envisaged.
The following I believe typically appears in the T & Cs of Fixed Interest Savings Certificates:
“18. We will add any interest earned to the value of the Certificate annually on the anniversary date. It will then form part of the capital value of the Certificate, which will earn further interest unless the Certificate is cashed in. The capital value of the Certificate after the annual interest has been added will be rounded to the nearest penny.”
However, the issue is whether an accumulation of the annual interest has been made by the trustees. Until the Certificates mature (or are cashed in early) the trustees have, at least for income tax purposes (if the interest had not been exempt), received nothing. On maturity the trustees receive their original capital investment with the balance constituting interest income. Until formal accumulation of the income by the trustees it remains income and thus not within the periodic charge to IHT (irrespective of what happens whilst the Certificates continue prior to maturity). Presumably an accrual of interest cannot be accumulated.
IHTA 1984 s. 64(1A) applies to “income [which has] arisen” which I would suggest would only apply to the above on maturity (or early cash in).
Malcolm Finney
My interpretation of para 18 of the Ts&Cs, as quoted by Malcolm, is that
the trustees have no discretion on the accumulation of interest - it is
an inherent part of the investment which the trustees will have accepted
when making the initial investment (whether, or not, they actually read
the Ts&Cs).
The value for the IHT periodic charge will include the capitalised
income.
Paul Saunders