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HMRC internal manual

Inheritance Tax Manual

Liability: introduction

The Inheritance Tax Act (IHTA) 1984 makes a clear distinction between liability and accountability (IHTM10801). In this context liability means liability for the payment of tax.

IHTA Part VII, beginning at IHTA84/S199, states who is liable to pay tax and the exceptions from, and limitations on, liability.

Under IHTA84/S205, except as otherwise provided, where under the IHTA two or more persons are liable for the same tax, each of them is liable for the whole. 

There are three main categories of liability to pay tax

  • IHTA84/S199 states the persons liable for tax on chargeable transfers made by a person (potentially exempt transfers (PETs) (IHTM04057), lifetime transfers chargeable when made etc.)
  • IHTA84/S200 states the persons liable for tax on chargeable transfers on death
  • IHTA84/S201 states the persons liable for tax on chargeable transfers made under Part III of the IHTA relating to settled property (IHTM16000).

In all three of those sections, references to any property include references to any property directly or indirectly representing it.

There are important supplementary provisions governing liability in special cases (IHTM30121) and limitations on liability.

A person may be liable under more than one category in relation to a particular transfer. It is important for you to consider a person’s liability under all alternative categories in view of the possible impact of the limitation of liability provisions and the implications for accountability.

There are separate provisions limiting liability by lapse of time (IHTM30461).

Solicitors Act 1974 and Solicitors Act (Scotland) 1980

In no circumstances does the office seek to hold the Law Society liable for Inheritance Tax (IHT) payable either

  • In respect of moneys which it has been paid by way of compensation under the Solicitors Act 1974
  • In respect of the rights of recovery created by acts of dishonesty in respect of which compensation has been paid.

Similarly the Law Society of Scotland is not regarded as liable for any IHT payable in respect of grants made from the Scottish Solicitors Guarantee Fund established by the Law Society of Scotland under the Solicitors (Scotland) Act 1980 IHTA84/S43.

The same considerations apply in relation to grants made from the Compensation Fund by the Law Society of Northern Ireland under the Solicitors (NI) Order 1976.