Parent and School fees

I have the situation where the parent paid for her son’s school fees until he reaches 18 (5 terms, approx. £75,000).

Parent arranged this the month before she died.

I’d be grateful for any comments on how the payment of £75k should be treated in relation to IHT.

Thank you.

Gill Collins


I would not see this payment as a transfer of value for IHT purposes.

However, on what basis was the payment made?

If the deceased had entered into a binding contract with the school to pay the fees, and there can be no refund, then the monies have left the estate and that’s it.

However, if the payment is intended to meet the school’s fees as they arise, is it more in the form of a deposit, or perhaps a Quistclose Trust, so that to the extent the monies paid over are not subject to a binding contract they form an asset of the estate.

I suggest the starting point (and perhaps the finishing point) must be the extent to which there is a binding contract between the deceased and the school at the time of her death.

Paul Saunders

One of the options in s11 of the Inheritance Tax 1984 could well apply here.

Incidentally, I have read comment previously suggesting that such payments through a Will (ie on the parent’s death) might also be exempt under s11, but I have not come across any real-life examples. I would be interested to hear from anyone who has managed to claim exemption under any part of s11 in respect of a payment via a Will or intestacy.

Paul Davidoff
Moon Beever

Would this not qualify for exemption under s.11(1)? (maintenance of the family)

Andrew Goodman
Osborne Clarke LLP

The estate is defined as the property to which the deceased was beneficially entitled at death.

Has she paid away the £75K to the school or merely agreed to do so?

This might also be a timing issue, as to income, and you will doubtless have looked at this, but as she was paying the school fees anyway, I assume, is it not at least in part also arguably “normal expenditure”, albeit in advance and perhaps also out of capital not just future income? She was not undertaking someone else’s liability:

s. 21 (1) A transfer of value is an exempt transfer if, or to the extent that, it is shown—

(a) that it was made as part of the normal expenditure of the transferor, and

(b) that (taking one year with another) it was made out of his income, and

© that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living.

I would agree that there might be a little difficulty in showing that the deceased was able to maintain a given standard of living post decease, even if devout, but there may be a part of the payments which could benefit from the exempted property régime, either for the year of payment, or from year to year, if normally paid out of income.

Peter Harris