HMRC amends IHT rules on borrowing deductions

In a two-page document, HM Revenue and Customs has unveiled its draft statutory instrument designed to enact changes brought in as part of Finance Act 2013 to restrict deductions from an estate in respect of borrowing liabilities.

The changes set to be made are to ensure that the treatment of liabilities is consistent with provisions introduced by the Act, which restrict what could be excluded from estates for inheritance tax purposes.

The new rules, which can be viewed here, change the definition of “total liabilities of the estate” so that they no are no longer reduced to take account of borrowings used to financed excluded property, such as property situated outside of the UK.

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Any liabilities that have not been repaid out of the assets in the estate, will also be excluded in most instances.

Comments on the draft regulations should be sent to Danka Wigley at HM Revenue & Customs by 7 February.