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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Certificates of Tax Deposit: valuing for IHT purposes

The value for Inheritance Tax of Certificates of Tax Deposit in the deceased’s estate should generally include interest at the higher rate(s), less income tax on that interest at the basic rate in force at the time of the death, from the date of deposit to either

  • the date of death, or
  • six years from the date the deposit was made

whichever is the earlier.

There is one exception. This is where the estate has a liability for tax for which the due date is before the date of death. In those circumstances the value of the Certificates should include interest at the higher rate(s), less income tax on that interest at the basic rate in force at the time of the death, from the date of deposit to

  • the due date of the tax liability which the Certificates are being used to pay.

If the value of the Certificates is more than the tax liability, interest is calculated on the balance to either:

  • the date of death,
  • or the sixth anniversary of the date of deposit,

whichever is earlier.

You should ask the taxpayers to account for the Certificates in the above way. But if in practice the value offered includes interest at the lower rates without a deduction for income tax, you may accept that figure. Details of the rates of interest that apply (HMRC website) can be found at http://www.hmrc.gov.uk/payinghmrc/index.htm.

Unless the Certificates are used to settle a tax liability that had a due date before the date of death, it is not relevant for the date of death value whether the Certificates are to be used to pay tax.

If the basis of valuation is challenged, you should refer the matter to Technical for advice.