Valuing claim for IHT purposes

A deceased died in 2018 and at the date of her death there was a potential claim for damages under the Law Reform (Miscellaneous Provisions) Act. A IHT400 was submitted and tax paid and the estate practically finalised, save the damages claim. The IHT400 made reference to the claim, but no value was included due to the nature of the claim and the time it will take to finalise. (The deceased was involved in an accident about a month before death and third party solicitors were instructed to consider whether a claim could be made; negligence had not been admitted.)

Four years later, the claim has been successful and the deceased’s estate is entitled to £450,000. I understand that compensation payments are assets of the estate for IHT purposes. However, IHTM10264 provides that a discount may be applied in calculating the death value and that no interest should be due on the tax payable. Further, HMRC Trust & Estate Newsletter August 2013 states the right of the claim at the date of death is the market value based on various factors.

Do members have any experience in what death value should be applied? It is clear that the claim had a value at death, but it is submitted that if liability had not been admitted at the time of death, a heavy (more than 50%) discount should apply. Any pointers would be appreciated.

Ihsan Ali
I Will Solicitors Ltd