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Lee Rossiter
Jun 2024
In certain circumstances, HMRC will allow a Personal Representative to postpone payment of all or part of the tax and interest due on delivery of an account. This is referred to as a Grant on credit.
This year's Spring Budget (6March 2024), included changes to the current probate process. From 1 April 2024, Personal Representatives (PRs) (i.e. Executors and Administrators) now have the option to apply to HMRC for a "Grant on credit" if they are unable to pay the tax due on submission of the IHT400.
So, what does this mean for people dealing with estate administration?
After someone dies, Inheritance Tax (IHT) is payable on certain assets within six months after the end of the month of death. Certain assets such as property can be paid in instalments over 10 years but interest will accrue (currently at 7.75%) on all unpaid tax. HMRC requests that all the IHT due within six months has been paid before they issue confirmation to the PRs that they are happy for the Grant of Representation (the Grant) to be applied for.
The PRs may be able to use some of the deceased’s assets to pay the tax and interest in the following ways:
PRs are personally liable for the Inheritance Tax (IHT) due on the deceased’s estate, and HMRC expects them to consider all financial sources, including their own assets, to settle any IHT due. However, from 1 April 2024, PRs are not expected to seek commercial loans to pay the IHT before applying to obtain a Grant on Credit from HMRC but they need to ensure they have exhausted all other avenues for the Grant to be issued.
The proposed Grant on Credit changes have the potential to eliminate the need for high-interest loans in estate administration, but concerns arise regarding the burden of proving why a 'Grant on credit' is appropriate and the timescales for HMRC's decision. In some estates (where a property sale is imminent) it may be quicker to obtain a loan for IHT and then repay the loan as soon as the property has sold.
HMRC has also confirmed in estates where PRs or beneficiaries are living in the estate property, they do not want to cause hardship by forcing the PRs to sell the property to discharge the IHT liability. Therefore, this situation will be reviewed on an individual basis and the estate will be monitored for payment.
Kings Court Trust is a probate and estate administration provider that offers award-winning solutions to support every family.
Whether you need a hand obtaining the Grant of Representation, completing the complicated tax and legal work, or anything in between, you’re in safe hands with our team of specialists.
If you have any questions about the estate administration process, including applying for the Grant of Representation, call our Client Services Team on 0300 303 9000 or fill in the form below.
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