HMRC Corrective Account and Increase in Outstanding Mortgage During Period of Administration

[robertiac1]

My wife is executor for her Mother who died in February. Her Mother had taken out an equity release mortgage on her property, and for the IHT 400 the the figure for the outstanding mortgage at the date of death was obtained from the equity release company. Probate was duly obtained, and the house was then sold, and the mortgage paid off. Since interest on the mortage is calculated on a daily basis the outstanding loan had gone up by £9K since the date of death. The solicitor is filling in the HMRC corrective account and in the box for Increases in liabilities, exemptions and reliefs we have suggested that the figures pertaining to the increased mortage should be included. This has been rejected as "the redemption amount was not the amount outstanding at the date of death, so cannot be included for IHT purposes". The first part is certainly true, but why then does the form say "list any liabilities that have increased" if you are not allowed to do this?

[MichCat]

It means increased as at the date of death, not the period after. IHT is based on valuations at the date of death. An example, is something where the calculation changed. Say, you had a mortgage and you were told that £50k was outstanding at the date of death but a few weeks later, the Bank said that they had made a mistake and the correct value actually was £55k. You would enter this on the corrective account.

The interest that is charged for the period between death and redemption is an expense of the estate, it did not exist at the date of death. It goes both ways, say some shares were worth £50k at the date of death but worth £55k when sold. That is income of the estate, you would not go back and pay more IHT.