Some or all of the IHT due in respect of a deceased person’s estate must be paid before probate is granted (referred to as ‘confirmation’ in Scotland). This can be done using some of the deceased’s assets, such as bank and building society accounts. Where funds cannot be released from the deceased’s estate, it may be possible to apply to HMRC for a grant on credit.
HMRC’s guidance explains how to make an application. The process includes:
- sending a completed form IHT 400 (or equivalent in Scotland or Northern Ireland);
- making a statement to the effect that the applicant is unable to release funds from the deceased’s estate; and
- indicating how much IHT can be paid.
If HMRC agrees to the grant on credit, the applicant must undertake to pay the IHT within an agreed timescale. IHT is due by the end of the sixth month after the person died, and HMRC will charge interest on any IHT not paid by this date. HMRC may also place a notice of the charge against any land or buildings in the estate at the Land Registry. A potential buyer may ask for this to be removed before the land or buildings are sold.
Detailed guidance can be found in HMRC’s Inheritance tax manual at IHTM 05120 onwards. This includes guidance on the circumstances in which HMRC will consider issuing a grant on credit. These include where the personal representative has made every effort to raise funds to pay the tax. It is confirmed at IHTM 05123 that from 1st April 2024, it is not necessary for the personal representative to have sought a commercial loan before applying for a grant on credit from HMRC.
Separately, HMRC has published the March 2024 edition of its trusts and estates newsletter. The newsletter contains guidance on measures taking effect from April 2024, including the changes made to the rules for low-income trusts and estates (see this TAXline article). It also contains guidance on basis period reform, in which case the trust or estate, or the agent, should contact HMRC’s trusts helpline where a figure for overlap relief is needed.
