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IHT in settlement calculations

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    #11
    IHT on estate

    I have a question related to our estate and IT on loans related to the £325K bracket.

    When we all die we will have an estate, including housing, pension, investments etc. Then there are years worth of "loans".. Assuming all of this equates to over 315K does IHT apply to the lot for our kids?

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      #12
      And if that's the case, is there scope for the loans to be partially written off, year by year, with each amount falling below the £325k threshold, until the balance is nil?

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        #13
        IHT

        Under s72, IHT will be due only when loans are written off. I understand this!

        Confusion is around s86. As I understand, under this section IHT is still due.
        (a) If so, when?
        (b) How is this calculated? ie is it every 10 years or on death.

        I would really appreciate if someone can shade some light on this matter.

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          #14
          Originally posted by SimonJones View Post
          Under s72, IHT will be due only when loans are written off. I understand this!

          Confusion is around s86. As I understand, under this section IHT is still due.
          (a) If so, when?
          (b) How is this calculated? ie is it every 10 years or on death.

          I would really appreciate if someone can shade some light on this matter.
          Given the below from Paper IHTM42986 and the HMRC view that Loans are not Loans and are to be construed as Income for Tax purposes does this provide relief from IHT under S72 , hence no charge

          --- Start of Extract from IHTM42986
          IHTM42986 - Employee benefit trusts: property leaving employee benefit trusts: treated as income

          Where the property leaving the trust is treated as income for Income Tax purposes there will be no charge under IHTA84/S72 by virtue of IHTA1984/S70(3)(b). This applies where the payment is (or will be) income in the recipient’s hands for Income Tax purposes (or would be if the participator were resident in the UK and subject to Income Tax). This relief will only apply in limited circumstances:

          it is important that it is the actual payment leaving the trust that is subject to Income Tax.
          there must be clear evidence, not just a vague possibility, that the payment out will be liable to Income Tax, as suggested by the words ‘or will be’.

          For example, if a loan is made to beneficiary and a beneficial loan Income Tax charge arises, the relief does not apply.
          --- End of Extract

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