Can I Reduce Inheritance Tax ?

[executor]

I am the executor for my late father's estate.
I lived in his house and for a number of years paid the gas, electricity and phone bills and also contibuted to council tax.
Over the last 5 years I have also paid about £7000 on double glazing and other improvements to the house, not realising that my father had sufficient capital to have paid for these items.
I now find that I have to pay inheritance tax.
Can I claim that the £7000 was in fact a loan and is now repayable?
It does not seem right that I paid income tax on my earnings to pay for the improvements, VAT on the improvements and now have to pay inheritance tax on the house which without these improvements would be worth less.
Does being a resident in the house give me any way of reducing the value of the house for inheritance tax purposes?
Any help will be appreciated.
thank you

[Lee Young]

To obtain a tax benefit you would need to show the payment as a loan, and in the absence of any paperwork to that effect this will be difficult and the Revenue will almost certainly deny the IHT savings.

[robertmlaws]

"Does being a resident in the house give me any way of reducing the value of the house for inheritance tax purposes?"

It might help in the sense that if you continue to live in it after you have inherited it then you will have no CGT liability when you eventually sell it. There is therefore much to be gained by obtaining as low a probate valuation as possible. I suggest you pay for several formal RICS valuations and explain to the valuer that you want as low a value as Captial Taxes would accept. Do not use estate agent 'market appriasals' as they tend to be high. Send in the lowest (or lowest two perhaps) valuations with your tax forms.

If you do not live in it after inheriting it then there will be CGT to pay on the eventual sale, so what you save in IHT you would lose in CGT later (if you pay tax at 40%).

Robert