Reply to: Inheritance Tax part of Settlement

[Wimbledon]

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.

Hi, how did your discussion go on this? i am in the same situation, there is no option to not pay the IHT in my offer. I have the same trusts, do we know if they are writing off loans?

[Alexisa]

I had the same problem and wrote 2 complaint letters regarding my being charged for HMRC's incompetence in delaying my settlement. I had started my settlement in March 2019 and paused in Oct due to the review and the assurance my calculations would not be affected. Though both complaint have acknowledged my settlement was delayed (on HMRC's side), they have still not offered back the difference in 2019 and 2020 calculations of the IHT. They offered me monetary redress but I am not satisfied and am now taking my complaint up with the Adjucator's office. Even though I have fully settled now because I didn't want any further penalties, I will continue to chase this unfair recalculations and a refund, no matter how long it takes or how devalued the money may become. HMRC is unfair!!

I have written to Mary Aiston and complained, but not sure that will do anything. I keep getting a bigger and bigger settlement number each time they look at something

[Alexisa]

I have had letters originally telling me that no IHT was due on the scheme then subsequent letters over the years telling me there is and then assorted letters and offers detailing numbers that vary by 15k.

I’ve trawled through years worth of posts on here for days and countless google searches trying to get a definitive answer but clarity, there is none.

It’s a hybrid of Alice in Wonderland and Kafka.

Just had the same issue.mtold in April 19 there was no IHT due, now asked for £16k+

[Idee77]

I also just received the latest brown envelope. I had signed the settlement offer last year and sent it back to them (had agreed the IHT + tax etc). Was waiting for their final acceptance letter (in the mean time the trustees released the loans.......HMRC dont know this) which never arrived - upon questioning I found out about the LC review and they were giving people the option to stall settlement pending outcome of review. In January they wrote telling us the outcome and saying they would present all options by end of July (this brown envelope) - they also said 'you will be able to settle on the SAME figures as previously agreed'. So this particular brown envelope.. the normal tax and interest part of the settlement is the same as agreed... but they have bumped they IHT up by 2.5k which I assume is the conitnued build up of the 0.25% per quarter..... surely they cant do that since they said the previously agreed settlement figures were fixed until we had a chance to consider this latest letter?

I had the same problem and wrote 2 complaint letters regarding my being charged for HMRC's incompetence in delaying my settlement. I had started my settlement in March 2019 and paused in Oct due to the review and the assurance my calculations would not be affected. Though both complaint have acknowledged my settlement was delayed (on HMRC's side), they have still not offered back the difference in 2019 and 2020 calculations of the IHT. They offered me monetary redress but I am not satisfied and am now taking my complaint up with the Adjucator's office. Even though I have fully settled now because I didn't want any further penalties, I will continue to chase this unfair recalculations and a refund, no matter how long it takes or how devalued the money may become. HMRC is unfair!!

[DanJackiels]

Can someone please explain how the inheritance tax part works.

So far I've understood that it is levied at 0.25 percent per quarter until the loans are written off. If I settle with IHT included then I have to have loans written off within 30 days (also heard 3 months). If I dont have the loans written off within the stipulated time then they would be recalculated and I could end up paying further IHT. There is also the 10 year aniversary charge, which Im not sure whether it applies in this instance or not. There is also the IHT thresholds, again I dont know whether this applies or not. Does anyone have a complete picture regarding IHT and how it works with regards to loan settlement?

I'd really like to know the answers to all the questions posed here as well ! I used IQ - is the trust behind IQ subject to IHT...or what trusts do not fall under IHT charges.

[dammit chloe]

This is an aside and taken from ETCtax's submission to the Finance Bill evidence. It is not saying IHT will not be charged it is an argument as to why IHT shouldn't be charged. For others to comment on whether it is legally arguable.

"Inheritance Tax (‘IHT’) should not be payable on any settlement. Principally, seeking to tax
taxpayers on the basis that these loans are income, i.e. recharacterizing these loans as income
and then also seeking to recover IHT on the same amount, if the loan is written off, is
contradictory and unfair. This charge to IHT is based upon the ‘exit charge’, whereby IHT is
charged upon dispositions from certain settlements. However, Section 65 (5) (b) Inheritance
Tax Act 1984 expressly excludes an exit charge where a payment is made for the purposes of
income tax. Therefore, an IHT charge, where income tax is also payable is unjustifiable and
unfair. "

Full evidence submission here

https://publications.parliament.uk/p.../memo/FB28.pdf

[hudson]

Can someone please explain how the inheritance tax part works.

So far I've understood that it is levied at 0.25 percent per quarter until the loans are written off. If I settle with IHT included then I have to have loans written off within 30 days (also heard 3 months). If I dont have the loans written off within the stipulated time then they would be recalculated and I could end up paying further IHT. There is also the 10 year aniversary charge, which Im not sure whether it applies in this instance or not. There is also the IHT thresholds, again I dont know whether this applies or not. Does anyone have a complete picture regarding IHT and how it works with regards to loan settlement?

[Albert49]

I also just received the latest brown envelope. I had signed the settlement offer last year and sent it back to them (had agreed the IHT + tax etc). Was waiting for their final acceptance letter (in the mean time the trustees released the loans.......HMRC dont know this) which never arrived - upon questioning I found out about the LC review and they were giving people the option to stall settlement pending outcome of review. In January they wrote telling us the outcome and saying they would present all options by end of July (this brown envelope) - they also said 'you will be able to settle on the SAME figures as previously agreed'. So this particular brown envelope.. the normal tax and interest part of the settlement is the same as agreed... but they have bumped they IHT up by 2.5k which I assume is the conitnued build up of the 0.25% per quarter..... surely they cant do that since they said the previously agreed settlement figures were fixed until we had a chance to consider this latest letter?

I suggest writing to your MP explaining the issue and ask them to raise with HMRC , I believe they are far more likely to take notice of such issues when you have your MP on side.

[bubble99]

I also just received the latest brown envelope. I had signed the settlement offer last year and sent it back to them (had agreed the IHT + tax etc). Was waiting for their final acceptance letter (in the mean time the trustees released the loans.......HMRC dont know this) which never arrived - upon questioning I found out about the LC review and they were giving people the option to stall settlement pending outcome of review. In January they wrote telling us the outcome and saying they would present all options by end of July (this brown envelope) - they also said 'you will be able to settle on the SAME figures as previously agreed'. So this particular brown envelope.. the normal tax and interest part of the settlement is the same as agreed... but they have bumped they IHT up by 2.5k which I assume is the conitnued build up of the 0.25% per quarter..... surely they cant do that since they said the previously agreed settlement figures were fixed until we had a chance to consider this latest letter?

[ScottW]

How have you “seen” this?
It would tally with my settlement letter that has increased iht monies owed since the last settlement letter a year ago.

I have had letters originally telling me that no IHT was due on the scheme then subsequent letters over the years telling me there is and then assorted letters and offers detailing numbers that vary by 15k.

I’ve trawled through years worth of posts on here for days and countless google searches trying to get a definitive answer but clarity, there is none.

It’s a hybrid of Alice in Wonderland and Kafka.

[Clairol]

Something new I've seen in the past couple of months - hmrc are now arguing where the s86 trust was setup for the benefit of employees, and if the company is no longer in existence, then the "loans" effectively become property (rather than employee benefits) and the IHT charge crystallised at the point at which the company dissolved.

This means the IHT charge is no longer related to whether the loans are written off or not, and must be paid as part of settlement.

How have you “seen” this?
It would tally with my settlement letter that has increased iht monies owed since the last settlement letter a year ago.

[ScottW]

Something new I've seen in the past couple of months - hmrc are now arguing where the s86 trust was setup for the benefit of employees, and if the company is no longer in existence, then the "loans" effectively become property (rather than employee benefits) and the IHT charge crystallised at the point at which the company dissolved.

This means the IHT charge is no longer related to whether the loans are written off or not, and must be paid as part of settlement.

Any additional news come to light in this subject?

I ask as the dreaded HMRC settlement paperwork has just dropped and don't know whether to tick Yes/No to paying the claimed Inheritance Tax.

[RickG]

Something new I've seen in the past couple of months - hmrc are now arguing where the s86 trust was setup for the benefit of employees, and if the company is no longer in existence, then the "loans" effectively become property (rather than employee benefits) and the IHT charge crystallised at the point at which the company dissolved.

This means the IHT charge is no longer related to whether the loans are written off or not, and must be paid as part of settlement.

[webberg]

I wondered whether anyone was exploring or challenging that fact or has HMRC got us all over a barrel??

We are convinced that HMRC's position on IHT is incorrect and we are and will be challenging it.

[Dave19]

Brillo

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