“In this world nothing can be said to be certain, except death and taxes.” Thank you, Benjamin Franklin.
Often, it is the case that there is death and tax to pay in the form of inheritance tax (IHT) which to many can seem unfair. While there are ways of mitigating inheritance tax, often this process takes a long time.
As IHT is only payable on death however, is there any way to reclaim tax that may have been overpaid? Where there are assets in the estate that are linked to the market such as shares then the answer may be yes.
Reclaiming inheritance tax based on share value
Where IHT is payable on an estate, a formal written valuation of the deceased’s shareholdings may be provided to HMRC and this related to the value of shares as at the date of death. Once the IHT calculation has been agreed and a payment made, some months will have elapsed (as a minimum, IHT needs to be paid within 6 months of date of death).
When shares come to be sold after probate has been granted the value of the shares may be different. If the value of the shares has increased, then capital gains tax may be payable to HMRC on the “gain”. However, if the value of the shares has decreased between the date of death and the date of sale, it should be possible to submit a claim to HMRC that some of the IHT should be refunded to the estate.
Restrictions to reclaiming inheritance tax
This relief is only available if the shares have in fact been sold after death. A simple drop in the value of any shares is not enough to qualify.
So, the value of the shares at the date of death can be replaced by their value at the time of the later sale, if that sale has taken place within 12 months of the date of death.
It will be necessary to make this claim to HMRC within 4 years of the end and the following four conditions will need to be fulfilled. You must satisfy that the shares were:
- Qualifying investments; e.g. listed shares and securities (including those listed on recognised foreign stock exchanges) and unit trusts?
- Sold for an overall loss?
- Sold within 12 months immediately following the date of death?
- Sold by an “appropriate person”, usually the executors or administrators who are liable for paying the tax?
Specialist inheritance tax solicitors
If you are looking for legal advice, contact our specialist inheritance tax solicitors. Call 0117 906 9400 or email firstname.lastname@example.org