Inheritance Tax refund on investment losses

Being appointed an executor to a loved one’s estate is a difficult scenario to deal with. The emotion of losing a loved one, dealing with lots of advisers you don’t know, and trying to fairly distribute assets to beneficiaries in accordance with your loved one’s wishes are just some of the difficult roles you are required to handle. Throw into the mix a market crash during this period and responsibilities can quickly become stressful and complex. This has been brought to life during the current situation where a combination of COVID-19 sweeping across the globe and oil deals collapsing has resulted in a market crash the likes of which we have not seen since the 2008/09 financial crisis.

When calculating Inheritance Tax payable on an estate, the value taken into account is the value of assets as at date of death. But as you know, assets such as stocks/shares, bonds and funds such as unit trusts and OEICs will move up and down with the market. It may take three, six, nine, even twelve months to sell the assets within an estate, by which time the market may have crashed, resulting in the need to sell these assets at a loss. The Inheritance Tax payable, however, is still based on the value of these assets at date of death.

Under a little-known tax rule, executors can apply for a refund for the Inheritance Tax paid on these losses. The important point to note is that the refund is for the tax payable on listed shares, gilts and unit trusts, so there must have been Inheritance Tax due on this element and the assets must have been sold within 12 months of death.

Here is a link to the form, which has further information but, as always, please reach out to your financial planner should you wish to discuss anything further.

View the form here

Stay safe,

Darren Lees

Director, London Office
darren.lees@carbonfinancial.co.uk

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The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

Tax and Estate Planning Services are not regulated by the Financial Conduct Authority.

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