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Where Taxpayers and Advisers Meet

IHT35 after 12 Month deadline

Bolbs
Posts:3
Joined:Sun Nov 01, 2020 11:30 am
IHT35 after 12 Month deadline

Postby Bolbs » Sun Nov 01, 2020 11:49 am

Hi,

HMRC have a 12 month deadline on selling inherited shares in order that you can qualify for claiming back IHT on any loss of sale of shares through form IHT35.

However it was not possible to sell these shares within HMRC's 12 month deadline as HMRC were incredibly slow in advising the probate office to issue probate, which they will haven't done. Without probate being granted none of the shares could be sold.

During the cornavirus the shares plummeted and are now worth 150k less than the original valuation used for IHT, so I have effectively overpaid IHT by 60k.

Is there anything I can do, or is that 12 month deadline final. I can't imagine I am the only person to be in this situation, and it may start becoming very common.

Thanks
Bolbs

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT35 after 12 Month deadline

Postby maths » Sun Nov 01, 2020 4:26 pm

I'm unaware of any discretion under which HMRC may extend the 12 months deadline.

A sale has to be effected within 12 months of death. For this purpose, the date of sale is the date the contract is entered into to sell not the date of final settlement.

In principle executors derive their authority from the testator's will (ie before a grant of probate is obtained) and I would therefore have thought that a contract could have been entered into within 12 months even if settlement occurred only post probate thus allowing a claim for loss to be made for IHT.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT35 after 12 Month deadline

Postby AGoodman » Thu Nov 05, 2020 10:51 am

I think the fundamental assumption is that if the sale takes place after 12 months (for any reason) then it's no longer a reflection of the value at death and there could be numerous intervening factors. The 12 month deadline isn't just a random administrative date (like the many deadlines to file or make elections).

I can see why you feel unfairly treated but agree with maths that HMRC have no power to give you any leeway and are therefore unlikely to do so.

That said, there's no harm in writing to them and asking them for special treatment given the delays. It's worth emphasising that the drops took place before the 12 month deadline (alongside your actual sale prices, perhaps provide values as at a date when you would have sold had the probate come through within a reasonable time - bearing in mind the probate registries were very slow at times as well) and I assume you did sell them shortly after you got probate in order to demonstrate your intent to sell them as soon as possible. There's no point writing if you haven't actually sold.

Bolbs
Posts:3
Joined:Sun Nov 01, 2020 11:30 am

Re: IHT35 after 12 Month deadline

Postby Bolbs » Thu Nov 05, 2020 5:56 pm

Thank you for your replies.

I have spoken with Equinity who are holding the majority of the inherited shares, and they confirmed that I am not able to do anything until the grant of probate, so there was very little I could have done even if I was aware of this 12 month deadline beforehand.

I now understand that HMRC imposed the 12 month deadline due the the value fluctuation, so surely the compromise would be to claim back any losses based on the value as at 12 months after the date of death rather than the actual selling price. The share value has dropped further since, and so I could potentially offset the rest with any CGT.

I am still struggling to understand how HMRC could impose a deadline that they themselves made me miss. Unfair....definitely, illegal.....probably.

Thanks
Bolbs

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT35 after 12 Month deadline

Postby maths » Thu Nov 05, 2020 9:13 pm

Did you put to Equinity my comments?

Bolbs
Posts:3
Joined:Sun Nov 01, 2020 11:30 am

Re: IHT35 after 12 Month deadline

Postby Bolbs » Tue Nov 10, 2020 11:04 am

Yes but unfortunately Equinity advised that they could do absolutely nothing without the grant of probate.

After only recently speaking with HMRC (previously my attorney was dealing with probate but I asked him to revoke his rights so I can carry on from where he left off) they could not understand why the IHT421 had not been not sent to the probate office back in May, as they had received everything they required. They will be sending it today.

Therefore for the 6/7 months from May to November it was entirely HMRC's error that caused the delay.

Hopefully that will help my case.


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