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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Grants on credit: undertakings involving land

In estates where the main assets are land or buildings, Inheritance Tax instalments and interest due should be paid even if the property remains unsold.

Where a sale has been agreed in principal but the Personal Representatives (PRs) need a grant to be able to exchange contracts or complete the sale see IHTM05133.

If the PRs are relying on the sale of property to pay the IHT due (because it is the only significant asset in the estate) we cannot accept an open ended commitment to simply pay the tax when the property is sold. In cases of hardship see IHTM05132.

Undertakings should include a specific period within which to sell the property and pay the outstanding tax and interest. It will be difficult for the PRs to promise to sell the house within 3 months as too many things can go wrong. In such a case it is acceptable that they use their ‘best endeavours’ to sell the property within 3 months.

This does not force the PRs to sell the property at an unrealistic price although they need to be realistic about the price that they may be able to achieve. But it does not allow the PRs to postpone the sale because, for example, they hope the market might improve. We expect the PRs to take all reasonable steps to ensure the property is sold within the time specified.

You will need to ensure that the PR is taking all necessary steps to effect a sale at a realistic market price. The undertaking should include a requirement for the PR to keep you regularly informed of progress and developments. If any delays suggest that the taxpayer is reluctant to take appropriate steps to sell the property required to pay the tax you should actively pursue the outstanding tax and interest, and the PRs will need to arrange alternative sources of funding if necessary.

If there is more than one property you will need to check whether the PRs intend to pay all outstanding tax on the estate or continue with instalments on the unsold property. If this is the case you may need to add to the undertaking to pay the outstanding tax and interest ‘except for any tax which continues to be paid by instalments’.

While the PRs may be relying on the sale of the property to pay the tax, the estate may include other assets. These may not have been suitable to secure funding to pay the tax before the grant or may not cover all the tax due. Nevertheless these will be accessible once the grant has been obtained and, depending on the value of the assets concerned, you should consider whether the undertaking should include an obligation to realise these assets and pay over the proceeds to HMRC.

A land charge should also be registered (IHTM05129).