CheckLists.Tax (beta)
V1: Death
GENERAL
- Interest of beneficiaries under a will/in an intestacy vest at death
- "He called our attention to a passage in Williams on Executors and Administrators (13th Edn), p 57c, and to a decision of the Privy Council in Meyappa Chetty v Supramanian Chetty ([1916] 1 AC at p 608), where the judgment was given by Lord Parker of Waddington, which clearly established that an executor derives his title and authority from the will of a testator and not from any grant of probate. He also referred us to the decision of this House in Cooper v Cooper (1874) (LR 7 HL 53), which shows that the interest of beneficiaries under a will and the interest of next of kin in an intestacy both vest at death, subject only to the payment of the debts and the administration expenses of the testator or intestate." (Bambridge)
Legislation:
Cases:
Bambridge v. IRC [1955] 3 All ER 812 (HoL);
HMRC manuals:
Commentary:
See also:
INCOME TAX ON ESTATE
Income arising to executors/personal representatives
- Residence
Split year treatment
- Does not apply in determining the residence status of personal representatives (Sch 45, para 41).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Rate of tax
- Trust rates do not apply.
- But if a sum representing income of the personal representatives is paid to trustees during the administration period, it is treated as income of the trustees (ITA s.483).
Legislation:
Cases:
HMRC manuals:
Commentary:
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Settlements legislation
- Attribution of income where settlor retained an interest ceases on death
Attribution ceases
- Attribution only applies during life of settlor (s.624).
Settlor credit for tax paid by trustees
- See i4. Trust income.
- Apportion the tax - see TSEM4513.
Legislation: ITTOIA s.624;
Cases:
HMRC manuals:
Commentary:
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Transactions in securities
- Counteraction can be taken against personal representative
- Counteraction can be taken against the personal representatives of the person who obtained the income tax advantage (s.712).
Legislation: ITA 2007, s.712.
Cases:
HMRC manuals: CTM36825.
Commentary:
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Close company issues
- Identify what happens to any outstanding loans to close companies
- HMRC raise this point at CTM61665.
- Where debt released or written off when personal representative liable, separate charge applies (ITTOIA s.664(2)(d); SAIM5200).
Legislation: ITTOIA s.419; ITTOIA s.664; CTA 2009, s.947
Cases:
HMRC manuals: CTM61665; SAIM5200
Commentary:
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EMPLOYMENT INCOME TAX
Employment related securities
- Notional loan under Chapter 3C treated as discharged but no employment income
- Where employment-related securities are acquired for less than market value and there is a notional loan under s.446Q, that loan is treated as discharged (if not already discharged) when the employee dies, but does not give rise to employment income (s.446U(4)(b)).
Legislation: ITEPA 2003, s.446U;
Cases:
HMRC manuals: ERSM70140;
Commentary:
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CAPITAL GAINS TAX
Attribution of gains of non-resident trust to settlor (s.86)
- No attribution of gains arising in year of relevant person's death (even pre-death gains)
- Section 86 attribution does not apply if the settlor dies in the year (Schedule 5, para 3).
- Also does not apply if the settlor only has an interest by virtue of a certain individual and that person dies in the year (Schedule 5, para 4).
- Similarly if the interest depends on multiple individuals and they all die in the year (Schedule 5, para 5).
Legislation: TCGA, Schedule 5;
Cases:
HMRC manuals:
Commentary:
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Matching gains to benefits from trusts etc (s.87, s.89(2), Sch 4C)
- No matching in year after death
- Where the recipient of a capital payment dies:
- Match to trust gains in the tax year of death, even if disposal is after death.
- Do not match to trust gains in subsequent years (CG38605).
Legislation: CG38605;
Cases:
HMRC manuals:
Commentary:
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INHERITANCE TAX
Deemed transfer of value immediately prior to death
- The estate
Property
- Includes rights and interests of any description (IHTA s.272).
- Does not include a settlement power.
- Not to be mapped narrowly onto English law definition (UK wide concept) but English law view is informative (Thomas §73).
- Only rights that are legally enforceable (IHTM04030, Thomas, §73).
- A right to a future tax repayment is property in the estate, at least where the amount is knowable at the time of death (Thomas, §78).
- Interest in unadministered estate - see IHTA s.91 and Lincoln, §79 and Daffodil.
Deathbed gifts
- If a gift is made in contemplation of death and only becomes absolute on death, it can be revoked at any time before hand and, therefore, gives rise to property within the estate prior to death.
Rights of action
- In McDowall, gifts that were voidable under a power of attorney gave rise to a right in the donor's estate:
"The position therefore is that, immediately before his death, WCM had the right to recover these gifts because they were made by his attorneys acting outwith their powers... WCM's right to recover these gifts was part of the property to which he was beneficially entitled immediately before his death. That right had not been prescribed immediately before his death, and the fact that no steps have been taken by the executors to recover these gifts within the ensuing five years seems to us to be irrelevant."
- Value was the value of the gifts because the deceased had an "unanswerable claim to recover the gifts".
Legislation:
Cases:
Daffodil v IRC [2002] STC (SCD) 224;
McDowall v. IRC [2004] STC (SCD) 22, Judge Gordon Reid;
Lincoln v. HMRC [2024] UKFTT 886 (TC), Judge Blackwell;
Thomas v. HMRC [2025] UKFTT 1537 (TC), Judge Blackwell;
HMRC manuals:
Commentary:
See also:
- Valuing the estate
General rule
- Price property might reasonably be expected to fetch if sold on open market at the time (IHTA s.160).
Changes in value
- Changes in value of the estate occurring by reason of death are taking into account as if occurring before death (IHTA s.171).
- Exception for decreases within s.98(1).
- Applied to a right to a tax refund that was not property until the death in Thomas (§82).
Legislation: IHTA ss.160, 171;
Cases:
HMRC manuals:
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- Debt assets/right to receive sum: value on the assumption that the obligation will be duly discharged
- Value of a right to receive a sum due under any obligation determined on the assumption it will be duly discharged.
- Except to the extent that recovery is impossible/not reasonably practicable and has not become so by any act or omission of the person to whom the sum is due (s.166).
- Accordingly, the obligation may have a different value in the hands of the assignee compared to assignor (if the irrecoverability is due to the assignor)
Legislation: IHTA s.166;
Cases:
HMRC manuals:
Commentary:
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- Deductions for liabilities
Tax liabilities of the deceased
- HMRC accept that they are deductible (Thomas, §72).
Legislation:
Cases:
Thomas v. HMRC [2025] UKFTT 1537 (TC), Judge Blackwell;
HMRC manuals:
Commentary:
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Gifts with reservation of benefit
- General
- See C2: Gifts by individuals.
- Where the tests are satisfied immediately before death, the gifted property is treated as part of the donor's estate on death (s.102(3)).
- If the tests were satisfied, but cease to be satisfied prior to death, deemed PET at that time (s.102(4)).
- Apart from the above, the property is not treated as being in the donor's estate.
- Consider impact of property being in estate on value of other assets in estate.
- Even though property is not really in donor's estate, exemptions might still be available if property belongs to exempt recipient (IHTM14303).
- No exemptions can apply if the reservation ceases during the donor's lifetime, as that is a PET.
- Tests are applied in the period of 7 years prior to death (or from gift to death, if shorter).
- Potential worst of both worlds if lifetime gift is made (triggering CGT), but benefit reserved such that IHT is payable on death (with no CGT uplift on death).
Legislation: IHTA 1984, s.102;
Cases:
HMRC manuals: IHTM14303;
Commentary: McCutcheon 7-12 to 7-14;
See also:
- Agricultural and business property relief for GWR property
- If property was BPR or APR property at the time of gift and that property is subject to a reservation so as to be included in a PET or death estate:
- Shares are to be treated as having continued to be owned by the donor since the gift (Sch 20, para 8(1A)(a)).
- XX
Legislation: FA 1986, Sch 20, para 8;
Cases:
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Clawback of business/agricultural property relief
- Transferor dying within 7 years of transfer of value by closely held company qualifying for business property relief
- McCutcheon §2.81.
Legislation:
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