Triple Grossing up?

I am the executor of a badly drafted will where the residue is left to charity and the individual gifts are drafted to be ‘together with the amount of inheritance tax payable on such gift’. Then there is a catch all clause that says effectively that the testator wants the beneficiaries to receive the full amount of these gifts free of inheritance tax.

I see potential for HMRC going for a multiple grossing up, once based on the words of the will, again to work out the IHT attributable estate and again to calculate the tax. Which leaves the charity with very little.

The testator’s intention is clear - she wanted the beneficiaries to receive their gifts free of tax -but this, very arguably, is not what the words say. In people’s experience, are HMRC likely to respect the intention or go by this interpretation of the words? My instinct is to apply for probate on the basis of the intention and see what they say.

Isn’t it at least as equally important what the charity’s trustees have to say? If HMRC ‘gain’ unwarranted tax won’t it be at the expense of the charity? Ask the charity first.

Was the will professionally drafted, or home-made?

If the former, I suggest you obtain the will-drafter’s file to check the instructions. Once you know what was intended you can consider what further action might be required.

If home-made, it is likely the testator was doubling up on the wording to make sure the legacies were payable free of tax, no realising that this is the normal situation (s.211(1) IHTA 1984). In which case I would proceed on the basis that there is only single grossing required. If no IHT is payable in this instance, I might seek counsel’s opinion to support the position, in case of a later challenge by HMRC, so as to demonstrate I had acted reasonably. The charity(s) should not object to such a course of action as it also protects their position. However, if IHT is still payable, an appropriate explanation should be include in the “white box” on page 16 of the IHT400.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

That is very helpful. Thank you. The will was professionally drafted and I have gone back to the solicitors who did it to put them on notice. I’m sure they will be scampering back to their files.

You seem to agree with me that if we believe we know (and even better have evidence of) the testator’s intention then we should apply for probate, explaining the position to HMRC.

Thanks for the reply. We will of course clear our chosen approach with the charity.