Applying for a Grant of Representation on Credit for Inheritance Tax
How long do I get to pay Inheritance Tax (IHT) on a deceased’s estate? Head of Wills & Probate, Charlotte Day discusses…
If inheritance tax needs to be paid on a deceased’s estate then it needs to be paid by the end of the sixth month following the date of death i.e. if someone died on 30 July, then the tax needs to be paid by 31 December.
However, accessing funds to pay the Inheritance Tax can be difficult, if the deceased’s money is tied up in property or investments, which cannot be sold without the Grant of Representation. This can cause a ‘Catch 22’ scenario whereby you can’t obtain the Grant of Representation to sell an asset because you’ve not paid the Inheritance Tax but then you can’t pay the Inheritance Tax because you’ve not got the Grant of Representation to sell the asset.
So, what do you do?
There are existing options for paying tax instalments (if there is a property), but sometimes there are occasions where funds truly cannot be accessed, and the only option available to Personal Representatives is for them personally to take a loan out to pay the tax or pay the IHT from their own funds . Obviously, this is not palatable for most Personal Representatives.
HMRC offer an option to help Personal Representatives who are in this position.
This option allows Personal Representatives to apply to HMRC confirming they have exhausted all options to obtain the funds to pay the Inheritance Tax, but without success. The Personal Representatives will need to confirm the maximum amount (if any) that they can pay from any funds that they have been able to access, and then HMRC will then decide whether to allow the application for the Grant of Representation to proceed without all or any of the Inheritance Tax having been paid in advance.
If HMRC approves the application, then the Personal Representatives will need to sign a legally binding promise in which they will promise to pay the Inheritance Tax by a mutually agreed deadline.
Once this has been done, the Grant of Representation will be issued to the Personal Representatives who can then use it to sell assets and release funds to pay the tax.
Using this procedure won’t reduce the amount of Inheritance Tax that needs to be paid, and it is likely that HMRC will still charge interest.
Of course, further interest and penalties will apply if the Personal Representatives don’t then pay the Inheritance Tax by the deadline they have since agreed with HMRC as a part of the application to use this procedure.
How Can Timms Help?
If you have any questions about the payment of Inheritance Tax or the administration of an estate, please contact Charlotte Day on 01283 214 231 or c.day@timms-law.com
April 2024