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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Liabilities: restricted deductions: borrowed money used to acquire assets that qualify for relief

Where borrowed funds were used either directly or indirectly to finance the acquisition of assets that qualify for a relief from tax (‘relievable assets’), or to enhance or maintain the value of those assets, IHTA84/S162B sets out how the liability may be deducted. Relievable property in this context means assets that qualify for:

Provided that the liability may be deducted under IHTA84/S175A (IHTM28027) in the first place, the broad effect of this section is that the borrowed funds are first set against the relievable assets, reducing the value of the assets that can qualify for relief. Where the value of the loan is more than the value of the relievable assets, the excess may then be deducted against the remaining chargeable estate.

These provisions, where they relate to agricultural and business relief, also apply to relevant property trust charges under IHTA84/S162B(9). And they only apply to liabilities incurred on or after 6 April 2013 (IHTM28011).