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Before we look at the reliefs below, it’s worth noting that a Potentially Exempt Transfer (PET) is an absolute transfer of assets from one individual to another, which becomes exempt from IHT if the transfer is survived by seven years or more. Any IHT due on a failed PET is based on the value at the date of gift.
Donees can claim fall in value relief within four years of the donor’s death, to reduce tax on a lifetime gift, or trustees can claim it to reduce additional tax payable on chargeable lifetime transfers. Click here for more information on lifetime gifts.
The amount of relief available will be the fall in value from the date of the gift, to the value at the date of death. So if the gift was valued at £10,000 and it fell in value to £8,000 at the date of death, the relief would be £2,000. If the donee has sold the asset before the date of death, the fall in value is the difference between the value at the date of the gift and the gross sale proceeds. So if the gift was valued at £10,000 and the donee sold this gift for £9,000 before the date of death, the relief would be £1,000.
This relief cannot be claimed if the asset has been gifted by the donee or for wasting assets, which are those with a predictable useful life of no more than 50 years (such as a car).
As the name suggests, this relief concerns instances where assets are sold for a lower amount than their market value at the date of death (used for probate purposes). Where available, this relief will result in a refund of IHT. This relief can be claimed when:
All sales of shares in the period must be accounted for, and relief can only be claimed if there was an aggregated loss. Executors must be careful if they wish to buy back the shares they have sold at a loss, as this would lead to a restriction in the relief that may be claimed.
All sales are taken into account and relief can be claimed for any aggregated losses within a three year period following death. Further losses made in a fourth year are also eligible for relief, but any profit within this fourth year can be ignored. Again, there are certain conditions on the purchase of land/buildings that could lead to a loss restriction.
As part of a group of assets, some assets may be sold at a lower value than the original amount liable to tax. In this case, the ‘stand-alone’ value of the asset (the value of this single asset at the date of death), replaces the original value in the tax computation.
Post-mortem relief must be claimed by the person(s) liable to pay the tax within four years of the end of the specific period applicable i.e. four years after the 12 month period for shares, and four years after the three year period for land and assets valued in conjunction with others. The relief can still be claimed after completing the administration of estates, as long as it’s within this time period.
For more information on the above, or to find out if you're eligible for these reliefs, please fill out the form below and one of our experts will be in touch to discuss your requirements. Click here for more information on the financial obligations when someone dies.
