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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Other assets due to the deceased: grants from the compensation fund of the Law Society and Scottish Solicitors' Guarantee Fund

These funds were established to mitigate losses sustained by reason of the dishonesty of a solicitor or his employee(s). The Law Society’s fund was established in 1957. The relevant legislation is s.36 Solicitors Act 1974. The Scottish Scheme was established by the Law Society of Scotland under s.43, Solicitors (Sco) Act 1980.

Any payments made from the funds are at the absolute discretion of the Law Society. They are not taken into account for inheritance tax purposes at any time prior to the making of the grant.

When the Law Society makes a grant it becomes entitled - to the extent of the grant - to the rights and remedies (in respect of the loss) of the person to whom the grant is made. In Scotland it is not necessary for those rights and remedies to lie against the miscreant or defaulter.

Neither the grant nor the rights to which the Law Society becomes entitled are considered to affect either

  • the Inheritance Tax charge on the rights of recovery arising out of the dishonest acts which led to the grant, or
  • the personal liability of any individual for the Inheritance Tax so charged.