Property owners due tax rebate
A recent study by financial services provider NFU Mutual has shown that thousands of people may have paid more inheritance tax (IHT) on residential property than they should have and could be due a tax rebate.
With house prices falling by around 11% over the last four years, tax specialists at NFU Mutual have said that up to £90,000,000 in IHT could be reclaimable. IHT – which is based on the value of the property at the point of death – can be reclaimed if the property sells for less within four years. In simple terms, the IHT relief allows the sale price to be substituted for the date of death (probate) value. This relief does not apply to land that is transferred during the deceased’s lifetime.
NFU claim that properties that were sold between June 2008 and February 2009 and between June 2010 and August 2011 are the most likely to be eligible for a rebate. With house prices generally falling over the last four years, thousands of people could still be able to claim back any such IHT overpayment.
The sale of the property must be made by the person or people liable to pay the IHT. In the case of an estate, this will be the personal representatives; in the case of a life interest trust, this will be the trustees. If it is sold by anyone else, the relief will be lost.
Therefore, if the personal representatives are liable to pay the IHT and they subsequently sell the property below probate value, the gross sale proceeds can be substituted for the probate value. On the other hand, if the personal representatives first transfer the property into the name of a beneficiary and the beneficiary subsequently sells it at a loss, the relief is lost.
For further information on any of the issues raised in this article, please contact the Private Client team.
Posted on Jul 2nd, 2012 by Lyons Davidson