Instalment Option

Question 1

What is the burden of Inheritance Tax (IHT)?

Answer 1

The burden of tax is for the transferor to decide, which can fall on the transferees of gifts or be paid by the transferor from the estate.

Further details of the default rules are in section 31.8.

Question 2

When is IHT due for payment after death?

Answer 2

IHT is due six months after the end of the month of death, although PRs often pay earlier to expedite estate administration.

Tax must be paid before the grant of representation can be obtained (see section 30.6).

Question 3

What is the instalment option for IHT?

Answer 3

The instalment option allows tax on certain properties to be paid in 10 equal yearly instalments, starting six months after the end of the month of death.

Applies to land, business property, and certain shares.

Question 4

What types of property qualify for the instalment option?

Answer 4

Qualifying properties include land, business interests, and certain shares that meet specific criteria regarding control and value.

Shares must either give control or meet size and hardship criteria.

Question 5

When does interest apply to instalments under the instalment option?

Answer 5

Interest applies to instalments of tax on shares or business property only from the due date of each instalment, while other land incurs interest on outstanding amounts from the previous year.

Interest is not due if instalments are paid on time.

Question 6

What happens if instalment option property is sold?

Answer 6

If the instalment option property is sold, all outstanding tax and interest become payable.

Question 7

When is IHT due on a Potentially Exempt Transfer (PET)?

Answer 7

IHT on a PET that has become chargeable is due six months after the end of the month of death.

The instalment option may be available depending on circumstances (IHTA 1984, s 227).

Question 8

When is IHT due on Lifetime Chargeable Transfers (LCTs)?

Answer 8

IHT on LCTs made after 5 April and before 1 October is due on 30 April of the following year; otherwise, it is due six months after the end of the month in which the LCT is made.

Question 9

When is additional IHT due following a transferor’s death within seven years of an LCT?

Answer 9

Any additional IHT on the reassessment of an LCT after the transferor’s death is due six months after the end of the month of death.

The instalment option may also be available (IHTA 1964, s 227).