IHTM19080 - Procedures: completed form IHT416 received - investigation issues arising - specific

Having decided that you need to make further enquiries, any debts due to the deceased should be investigated to make sure that the full amount of the outstanding loan (including the interest) has been included in the estate and any interest chargeable under the terms of the loan has been received by the deceased, if the likely amounts make it worthwhile.

If the value of the loan has been discounted because it is, for example, argued that the money cannot be repaid, or is not repayable on demand, the answer at box 9 (IHTM19050) should include an explanation. If you are satisfied with this explanation, the matter should be referred to the Board’s Actuarial Officer. If you are not satisfied you may need to make further enquiries and ask the taxpayer or agent to provide evidence to support their line of reasoning.

Any lifetime releases (IHTM14001) or repayments of the debts have been properly accounted for either as gifts or as part of the free estate (see boxes 2, 3, and 6 (IHTM19050)). If any repayment of the outstanding loan was made by a Deed of Release, then, unless the release was treated as a gift, and no annual exemptions have been deducted, you may need to obtain further evidence that the Deed of Release was effective under the law. In Scottish law, a formal Deed of Release is not necessary to release part of a loan in the deceased’s lifetime and annual exemptions can be given against any release. The release can be by ‘informal writing’ or ‘verbally.’

If some or all of the debt has been written off, the amount written off will be a gift. You should check that the gift has been returned in Form IHT403.

If the evidence of the debt is a loan document from the deceased to the trustees of either a settlement or insurance policy (IHTM20029) and the loan is to be repaid to the estate by the trustees, you should ask for a copy of the loan agreement or any settlement or policy connected to it.

Any debt where

  • the deceased made a loan to the trustees of either a settlement or insurance policy, and
  • the loan is to be repaid to the estate by the trustees, and
  • the loan arrangements were entered into on or after 18th March 1986,

should be referred to Technical for advice and consultation with the Board’s Actuarial Officer, if necessary.