If you are an executor, it is the role of your solicitor to advise you as far as possible on matters related to the valuation of the estate and the inheritance tax (IHT) liability. Executry advice is often time sensitive, but the volatility and downturn of many markets in the last few years provides an additional challenge for executors - the valuation of shares. In this article, we look at share loss relief, when it occurs and how to make a claim.
IHT share loss relief is a relief that allows executors to recalculate the IHT due on an estate where the executors sell shares or investments owned by the deceased at a loss.
Over a certain threshold, IHT is due on the value of the deceased’s estate at the date of death. If the person died just before a market downturn, the current value of their estate might have been affected, particularly if they held shares.
If a significant discrepancy in the value of an estate arises under these circumstances, the IHT liability (calculated based on the value of the estate at the date of death) may be significantly higher than the actual value of the estate following a crash in share prices or market downturn. This can leave executors feeling like they have overpaid IHT. However, it is possible to claim back some of the IHT paid through share loss relief.
IHT share loss relief applies where executors have sold ‘qualifying investments’ at a loss within 12 months of the date of death. Qualifying investments are shares or securities listed on a recognised stock exchange. The relief applies to all qualifying investments sold, not just those sold at a loss. You should check with a solicitor whether your transaction qualifies for share loss relief.
Any claim for share loss relief must be submitted within 4 years from the end of the 12 month period following the date of death.
Executors must pay the initial IHT liability, then obtain a Grant of Confirmation/Probate. The executors may then claim share loss relief using form IHT35.
The form asks for details about the shares and investments, including their value at the date of death, as well as the price the executors sold them for at a later date. HMRC will then use this information to recalculate the estate’s IHT liability and repay any excess IHT paid.
Jennifer Gray is a Senior Executry Paralegal and deals with all aspects of executry administration and related tax matters. If you have any questions about this article or the issues covered here, please complete our contact form or call us on 0131 225 1200.
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