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HM Revenue and Customs Brief 21/09


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Issued 2 April 2009

Inheritance Tax and valuation of gifts involving Discounted Gift Schemes (DGS)

The appeal referred to in Revenue & Customs Brief 23/08 was heard on 5 November 2008. In its decision (2008) EWHC 3105 (Ch) reported at (2009) STC 510, the High Court found in favour of HM Revenue & Customs (HMRC) and the appeal is now final. The decision therefore confirms as correct the basis on which HMRC values the retained rights in DGS where the settlor is older than 90 next birthday (actual age or deemed age following underwriting) or where the settlor is considered to be uninsurable per se as at the transfer date. This means that only a nominal value is to be attributed to the retained rights and the value transferred by the gift (ie the amount given by the settlor less the nominal value of the retained rights) will extend to a sum adjacent to the whole amount invested in the scheme. Furthermore there is nothing in the Inheritance Tax legislation which allows any withdrawals actually taken between the gift date and the date of death of the settlor to be offset against the sum invested.

Now that the above case has been settled HMRC will begin to process those cases which have been on hold, as explained in Revenue & Customs Brief 23/08. In some cases, no tax has been paid, whereas in others tax has been paid on account to prevent interest accruing.

HMRC will be contacting executors and/or their agents in the near future in order to bring matters to a conclusion. Where (correct) sums have been placed on account no further Inheritance Tax should be payable and if there are no other outstanding matters clearance letters can be issued. Where no such payment on account has been made an Inheritance Tax calculation will be issued for payment of additional Inheritance Tax and interest. New cases will be dealt with in accordance with the Inheritance Tax Technical Note (PDF 45K) published in May 2007 in the light of the High Court decision.

Any questions related to this brief should be sent to:

P Oxlade
HM Revenue & Customs
Board’s Actuarial Officer
Actuarial Group
Ferrers House
Castle Meadow Road

Tel: 0115 974 2950

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© Crown Copyright 2009.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2009-04-04 12:05:44 in Tax Articles

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