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The administration of a number of estates is being held up because the treatment of home loan schemes for the purposes of inheritance tax (IHT) and the pre-owned assets charge has yet to be resolved. A test case is currently under way.
HMRC’s most recent trusts and estates newsletter says the department will, on request and where possible, provide an estimate of the tax payable should litigation find in the taxman’s favour, to allow executors and trustees to deal with estates affected by the test case.
Executors and trustees may then make a payment on account to stop further interest accruing, or they can make and retain an appropriate reserve from funds in their hands.
The Revenue acknowledges that money is paid on account does not signify acceptance of the department’s view.
In the event litigation is decided in favour of the taxpayer, HMRC will adjust the IHT position as necessary and refund tax that has been overpaid.
