The number of people reclaiming Inheritance Tax (IHT) because of falling share prices has more than doubled in the past two years and is likely to increase during the current crisis.
When can you reclaim IHT on stocks and shares?
H M Revenue and Customs (HMRC) assess Inheritance Tax on the value of a person’s estate on the date of their death. In some circumstances an asset can lose value – particularly stocks and shares – before an executor can sell the asset.
If the executor sells the assets within 12 months at a lower value than declared to HMRC, then they can reclaim the IHT paid on the difference between the two figures. For example, if the executor declares the shares to be worth £100 on the IHT declaration but subsequently sells them for £70 then they can reclaim the IHT paid on the £30 difference.
To be eligible for an IHT refund the shares must still be in the name of the deceased when sold and it should be an appropriate person who sells them for example, the will’s executor.
Why is there an increase in Inheritance Tax reclaims?
Fears over the global coronavirus pandemic, caused the stock market to crash in February and March this year. If the death of the shares’ owner pre-dated the crash, it is likely the executor gave a higher valuation figure to HMRC to assess the IHT liability. If the executor has now sold the assets at a lower value, they can now make a claim to refund the difference.
HMRC will not automatically refund the difference, the executor will need to make a claim.
What about other assets?
Similarly, if an executor has sold the deceased’s property within four years of death, for a lower amount than the original valuation they should check if the estate is due a refund of Inheritance Tax.
Given the fragility of the property market at this time, anyone who is carrying out the administration of an estate should keep in mind that they may have to make a claim for an IHT refund at a later date.
How to get help with Inheritance Tax
Inheritance Tax can be difficult to calculate and getting it wrong can cost hundreds of pounds. If you are an executor of a will and do not know where to start, you can appoint a solicitor to help you administer the deceased’s estate. Probate solicitors deal with IHT forms day in day out and can help you reduce the estate’s tax liability.
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