Acting as an executor can be a significant responsibility. One of your key duties is to identify and value the deceased’s assets, settle any liabilities, report the estate to HMRC, pay any Inheritance Tax (“IHT”) due, obtain a Grant of Probate and ultimately distribute the estate in accordance with the Will or the rules of intestacy.
As part of the probate process, executors must provide HMRC with details of the estate’s value at the date of death. This includes obtaining accurate valuations of any property owned by the deceased. Where a property is owned as tenants in common, only the deceased’s share of the property should be included in the valuation.
Given the importance of these figures, it is often advisable to obtain a professional valuation from a qualified Chartered Surveyor. HMRC can query property valuations, particularly where they appear inaccurate or significantly differ from the eventual sale price.
The value declared to HMRC forms part of the estate’s inheritance tax calculation. If IHT is payable, the amount due will often need to be paid before Probate can be obtained and before the property can be sold.
However, property markets can be unpredictable. Delays in administration, changing market conditions, rising interest rates or reduced buyer demand can all result in a property selling for less than its probate value.
Where this happens, the estate may have paid more inheritance tax than was actually necessary.
Fortunately, HMRC provides a relief known as Loss on Sale of Land Relief, which allows personal representatives to substitute the lower sale price for the original probate value when calculating inheritance tax.
If the claim is successful, HMRC will recalculate the inheritance tax liability and refund any overpaid tax to the estate.
This relief can apply to:
The claim must generally be made by the personal representatives and within the applicable time limits set by HMRC.
Whilst the relief can be valuable, it is not available in every circumstance. There are a number of qualifying conditions that executors must satisfy before a claim can be made.
In addition, where an estate contains multiple properties or a combination of assets that have increased and decreased in value, a claim may not always produce the most beneficial tax outcome. Careful consideration should therefore be given before submitting a claim to HMRC.
Executors should also retain records of valuations, sale particulars and completion statements to support any application for relief.
Administering an estate can be complex, particularly where inheritance tax is payable or property values change during the administration period. Our Succession team can assist with obtaining probate, preparing inheritance tax accounts, reviewing estate valuations and advising on whether a claim for Loss on Sale of Land Relief may be appropriate.
If you would like advice on inheritance tax reliefs or assistance with estate administration, please contact Whitehead Monckton on 01622 698000 and speak to a member of our Succession team.
