Inheritance Tax  

Inheritors told to recoup ‘overpaid’ IHT as markets fall

Inheritors told to recoup ‘overpaid’ IHT as markets fall

Those who have inherited shares which have now collapsed in value due to the coronavirus crisis could be owed inheritance tax which was ‘overpaid’, experts have said.

Covid-19 has wiped 28 per cent from the FTSE 100 since the start of the year as countries closed borders, shut down businesses and cancelled all non-essential travel in a bid to curb the virus's impact.

This means those who have inherited shares within the past year could have paid IHT on a higher value than the shares are actually worth when sold.

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An IHT tax rate of 40 per cent is levied on all estates greater than £325,000.

The taxman accepts claims to repayment of IHT where the loss-making sale took place within 12 months of the date of death and the claim must be made within four years of the end of that 12-month period.

Other conditions include that the shares sold must be ‘qualifying investments’ — listed shares and securities and unit trusts and shares listed on Nasdaq, but not those traded on the Alternative Investment Market — and the shares must be sold by the legal personal representatives.

Also, there must be an overall loss on the sales of the qualifying investments as relief is only available if the gross sale proceeds of all shares sold is less than the date-of-death value for those shares.

George Bull, senior tax partner at RSM UK, said the tax firm was “certainly seeing more enquiries about this” than it had done in the past. 

He added: “It's a difficult judgement call to know whether to retain the shares and perhaps prolong the administration of the estate in the hope that values will recover, or to realise losses on a disposal within 12 months of the death which will perhaps produce a tax refund.”

Rupert Wilkinson, partner at law firm Wilsons, said: “There are going to be some very large sums at stake and the process of making a claim for loss relief is relatively straightforward.

“Those advising clients who have inherited shares should be highlighting this to them.”

Steve Carlson, chartered financial planner at Carlson Wealth Management, said it was important advisers were aware of this tax relief and ensured their clients were claiming where appropriate.

He added: “Those executing an estate who have already sold the shares should definitely claim back for overpaid IHT.

“But the situation is different if the sale has not yet happened and the losses have not been crystallised. People in this scenario should get financial and tax advice as the loopholes can be complex.”

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