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HMRC internal manual

Inheritance Tax Manual

Grants on credit: professional undertakings involving land

If the IHT is to be paid out of the proceeds of sale of land or buildings in the estate and contracts for the sale of the property have been exchanged, where they have been signed while the deceased was alive or will be exchanged as soon as the Personal Representatives (PRs) have the grant you can ask the solicitors dealing with the sale, who may not be the same firm as that dealing with the grant, to give a professional undertaking to pay the outstanding IHT and interest from the proceeds of sale.

A solicitor will not normally be willing to provide such an undertaking unless the PR has provided clear and irrevocable instructions that they should do so.

You should liaise with the Penalty Portfolio Holder if it appears that the PRs wish to obtain an urgent grant without making full and proper enquiries into the estate-see IHTM05125 and IHTM05127. You should also consider whether a limited grant might be more appropriate-see IHTM05150.

As the option to pay by instalments will cease when the property is sold it should be made clear to the solicitor that the amount payable includes all the tax due on the sold property.

If there is more than one property you will need to check whether the PRs intend to pay all outstanding IHT on the estate or continue to pay tax by instalments on the unsold property. You may need to amend the undertaking accordingly.

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 we require a separate undertaking to realise these assets and pay over the proceeds to HMRC in the event that the sale of the property is delayed or falls through.

There is no need to register a land charge once the professional undertaking is in place. But you should keep this under review, particularly if the sale falls through.

Example undertaking

In consideration of HMRC agreeing to issue form IHT421 without requiring full payment of the inheritance tax due upon delivery of the account I/we [full name and address] undertake:

To pay the outstanding Inheritance Tax and any interest accrued (except for any tax which continues to be paid by instalments) from the sale proceeds of [name and address of property] [after payment of the outstanding mortgage of £XXXX*] within five working days of completion of the sale of the property.

I/We undertake to confirm to HMRC without delay that exchange of contracts has taken place, the date when completion is anticipated or if, applicable, that the sale has been delayed or aborted.

  • The exact amount outstanding on the mortgage may not be known when the undertaking is given. As an alternative you can include [after payment of the amount required to redeem the outstanding mortgage which does not exceed £XXXX]