HMRC internal manual

Inheritance Tax Manual

IHTM28300 - Liabilities: investigating liabilities: uncashed cheques

A cheque is a revocable mandate or authority to the transferor’s bankers to pay money. It can be revoked at any time until it is cleared by the bank. This means that in strictness a cheque that has been written by the deceased but not cleared by the bank before they died is not a valid debt of the deceased.

But you should accept a deduction for any cheques that the deceased signed for consideration in money or money’s worth where this is reflected in the assets of the estate. For example, this means that you should allow a deduction if the cheque was intended to pay for building work or goods supplied to the deceased.

On the other hand a gift made by cheque that is not cleared by the date of death is not an allowable deduction and you should challenge the deduction claimed if the tax at stake is worthwhile. The gift is not complete - Re Owen, Owen v IRC [1949] 1 All ER 901. The most recent case of Curnock v IRC SPC/00365 upheld the principle applied in Owen.

In Scotland a gift by cheque is not complete until the cheque is cleared, since the drawer of the cheque may countermand it, s.11 Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. On being countermanded, the whole of the account against which the cheque was drawn remains at the disposal of the drawer.

The IHT400 instructions ask taxpayers to tell us who any uncleared cheques were written out to and for what goods and services. If this information is not provided you may need to raise an enquiry if the sums involved are worthwhile.