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HMRC internal manual

Inheritance Tax Manual

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 the earlier of

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

There is one exception - where the estate has a liability for tax and 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 the earlier of

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

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 can be found on GOV.UK.

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.