Inheritance Tax part of Settlement

[Forsythia]

Apologies if this has already been discussed and I have missed it.

I received a settlement pack from HMRC. It demanded a total of £378k, 50K of which is inheritance tax. I was a bit surprised because I had assumed that they would send the inheritance tax bill later once the loans has been written off.

Is it right that HMRC are just assuming IHT is due without actually looking at the trust? Also can the inheritance tax part of it be challenged?

[webberg]

Apologies if this has already been discussed and I have missed it.

I received a settlement pack from HMRC. It demanded a total of £378k, 50K of which is inheritance tax. I was a bit surprised because I had assumed that they would send the inheritance tax bill later once the loans has been written off.

Is it right that HMRC are just assuming IHT is due without actually looking at the trust? Also can the inheritance tax part of it be challenged?

No - read the settlement pack.

It says that in the event you ELECT, you can agree to pay IHT and if you do AND have the loans written off within a given period, then everything is settled.

It's VOLUNTARY.

You can say "no thanks". You may have no choice anyway of the lender refuses to write off.

READ THE WHOLE PACK AND UNDERSTAND IT.

[dangermaus]

I have settled and then afterwards had my loans written off.

If IHT is indeed due and does not qualify for the £325,000 allowance, I understand that there is a charge of 0.25% of the outstanding loan per quarter.

If for example if my loan from the trust started on 1st January 2015 and grew by £1000 every month for the next 4 years and the last loan was on 1st December 2018. I then get the loans written off on 1st December 2019. Please can somebody answer me the following:

1) Silly question but does the 0.25% per quarter still keep on accruing until IHT is paid or does that stop accruing as of the date the loans were written off? If it stops, would HMRC just apply late payment interest on this IHT figure from a particular date after the loans are written off?

2) How is the IHT paid? Is it part of settlement or does it go on the SA at the end of the tax year?

2) can anyone work out that the IHT figure would be today based on the above example?

[Forsythia]

No - read the settlement pack.

It says that in the event you ELECT, you can agree to pay IHT and if you do AND have the loans written off within a given period, then everything is settled.

It's VOLUNTARY.

You can say "no thanks". You may have no choice anyway of the lender refuses to write off.

READ THE WHOLE PACK AND UNDERSTAND IT.

Hi Webberg

So, as per your message above I thought I must have just not read things right. I have been through it all carefully and HMRC make it quite clear that the Trusts satisfied Section 86 and the inheritance tax is being charged under Section 72. There is no indication that IHT is voluntary at all. And the settlement offer includes the IHT in the total bill to be paid within 30 days, assuming loans are written off within 3 months. I am going to settle but I think I will put this settlement through a tax adviser to be checked. I certainly do not want to be bounced into paying IHT I may not owe.
The Trusts are Hamilton, Penfolds, Lighthouse and Assignment Solutions.

[webberg]

Hi Webberg

So, as per your message above I thought I must have just not read things right. I have been through it all carefully and HMRC make it quite clear that the Trusts satisfied Section 86 and the inheritance tax is being charged under Section 72. There is no indication that IHT is voluntary at all. And the settlement offer includes the IHT in the total bill to be paid within 30 days, assuming loans are written off within 3 months. I am going to settle but I think I will put this settlement through a tax adviser to be checked. I certainly do not want to be bounced into paying IHT I may not owe.
The Trusts are Hamilton, Penfolds, Lighthouse and Assignment Solutions.

You had the option when finalising the settlement to include or exclude the IHT.

What happens if those trustees do not write the loans off?

[Forsythia]

You had the option when finalising the settlement to include or exclude the IHT.

What happens if those trustees do not write the loans off?

ERmmm… I don't have any recollection of being given ANY options at all. I produced a list of loans, dates, names etc and then received the settlement pack.

[webberg]

ERmmm… I don't have any recollection of being given ANY options at all. I produced a list of loans, dates, names etc and then received the settlement pack.

Then you are, if not unique, at the very least so very unusual that not one of the 400 plus settlements we have dealt with had an absence of an option as discussed above.

[Forsythia]

You had the option when finalising the settlement to include or exclude the IHT.

What happens if those trustees do not write the loans off?

The Trustees have already agreed to write off the loans. I should say that I was not declaring information directly with HMRC but via an intermediary who is in contact with the Trustees. I am therefore assuming that is why I did not receive any option to not include IHT because that was a given fact.

I think my question is about whether IHT is definitely due when loans are written off? Is it definite that all these loans fall under section 72?
I wondered whether anyone was exploring or challenging that fact or has HMRC got us all over a barrel??

[BrilloPad]

I think my question is about whether IHT is definitely due when loans are written off? Is it definite that all these loans fall under section 72? I wondered whether anyone was exploring or challenging that fact or has HMRC got us all over a barrel??

HMRC have claimed IHT in the past. Advisers are exploring and challenging that.

[Dave19]

Brillo

I appreciate your experience with Montpellier, can I pm you?