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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating liabilities: future debts

If a liability is not due to be discharged until a future date it is taken into account at a discounted value rather than the amount eventually to be paid, IHTA84/S162 (2). So debts payable at a future date that do not carry interest (or with interest at less than the market rate) should be discounted. The rate of discount will vary according to market conditions.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

This rule does not apply to the deceased’s liability to Inheritance Tax, which is taken into account at the full amount whenever due (IHTA84/S162 (3)). Nor does it apply where there has been a change of accounting basis for a trade, profession or vocation that gave rise to a significant increase in income tax which may be spread over ten years, FA88/S44. The personal representatives have the option to accelerate the payment and in the circumstances a discount is not appropriate.

The introduction of self-assessment (SA) has meant that income tax liabilities may not be payable until some time after the date of death and may need to be treated as a future debt. It is also possible for CGT liabilities to be payable after the date of death.