Refund claims for overpaid IHT more than double

One of the effects of the Covid-19 pandemic is the fall in value of investments, particularly shares and property. Executors and beneficiaries dealing with the estates of the recently deceased have been particularly affected as IHT is based on the value of the estate at death, not on sale of the assets. Many taxpayers who paid Inheritance Tax (IHT) on shares that subsequently crashed during the Covid-19 pandemic could be eligible for a tax refund and recent reports show that the number of IHT refund claims has more than doubled in the last 2 years. If a refund is due, HMRC WON’T tell you or issue any money unprompted; the taxpayer must apply for it.

How it works

IHT is calculated based on asset values at the date of death and must be paid within 6 months. If assets inherited were valued at their peak and then fall in value (as seen with shares on international stock markets in recent months), IHT would have been based on a higher amount. If qualifying investments are then sold within 12 months of death at a lower value, a refund may be due on the overpaid IHT.

In order to claim a refund of IHT, the executors should submit an IHT loss relief claim if they sell qualifying investments within the 12 months, providing the gross sales value is less than the probate value. An IHT loss relief claim should be submitted within 5 years from the date of death and it is the net loss figure which will be considered.

Qualifying investments

These include:

  • Shares & securities listed on a recognised stock exchange at the time of death
  • UK government stock
  • Holdings in unit trusts

Qualifying investments do not include:

  • Holdings in unlisted companies
  • Holdings on the Alternative Investment Market
  • Loan notes

Property

Many taxpayers will have found they’ve inherited properties which have fallen in value during the Covid-19 pandemic and paid tax based on higher values. Executors have 4 years from the date of death to sell a property asset and if the property sells for less than the probate value, an IHT loss relief claim can be submitted (also within 4 years of death) to reclaim the overpaid tax.

Note that for both qualifying assets and property, for an IHT loss relief claim to be successful, the executors must make the disposals.

There are other conditions which must be satisfied to achieve a successful claim and we can discuss these with you in greater detail.

IHT thresholds

Currently, IHT is paid at 40% on estates above £325,000. This doubles to £650,000 for married couples or those in a civil partnership.

Where property is included in the estate, the new ‘main residence band’ means that from April 2020, the IHT threshold can be as much as £500,000 per person, or £1m per couple, meaning no tax is paid on qualifying estates worth less than £1m.

Says Julia Gallagher, tax partner at Curo Chartered Accountants “Since the stock market crashed due to Covid-19, we’ve been busy submitting IHT refund claims for a number of our private clients. We’re urging beneficiaries to consider making IHT refund claims if they’ve sold assets within a year of their loved one’s death as there’s a good chance they’ve overpaid tax and are in a position to make a refund claim.”

How Curo can assist

As well as providing Inheritance Tax planning services, Julia Gallagher is a probate-licenced Chartered Accountant and able to carry out almost all forms of probate work. This gives Julia a holistic approach, advising on optimising the IHT position, carrying out probate and preparing the relevant tax submissions.

Please email Julia Gallagher or call Julia on 01527 558539.

IHT

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