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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating liabilities: income tax

You should check that any deduction claimed for income tax liabilities

  • has been calculated correctly, and
  • does not indicate that business assets or income-producing assets have not been included in the estate.

In most cases you can accept a deduction for income tax as claimed. But you may need to raise further enquiries if:

  • the deduction is large (IHTM28151) in relation to the estate as a whole or inconsistent with what you know about the deceased’s lifestyle
  • the liabilities arise as a result of an investigation settlement (IHTM28152)
  • the deduction claimed is an estimate (IHTM28153).

You also need to take special care when dealing with deductions claimed for income tax payable on:

  • the disposal of an offshore fund (IHTM28154)
  • the disposal of deep discount securities (IHTM28155)
  • interest bearing securities
  • sums received following the discontinuance of a business (IHTM28157)
  • the death of a partner in a business (IHTM28158)
  • voluntary payments of tax by the personal representatives (IHTM28159)
  • the chargeable gains arising when a life insurance policy matures (IHTM28160).