Does the probate value need revising? New guidance on when HMRC will not allow a claim
HMRC has updated its guidance to make it clear when it will not allow a claim to increase the probate value of land that has been sold at a profit within three years of death. The new guidance applies where no tax is due on the sold land and is in the Inheritance Tax Manual at IHTM33026.
HMRC will not accept claims to increase the probate value for land sold at a profit if:
- the chargeable estate is below the nil rate band, or
- the sold land is exempt from tax, or
- the sold land attracts 100% relief.
The argument for this is that, as there is no IHT payable, there is no “appropriate person” (the person liable for the IHT) to make the claim.
Even if the land sold is liable to IHT the claim will be denied under HMRC’s interpretation of the ruling in Stonor v IRC  STC (SCD) 199. Although there is nothing specific in the legislation to disallow claims to substitute a higher value, it is HMRC’s opinion that the purpose of s191, Inheritance Tax Act 1984 is to provide relief from inheritance tax not increase the charge.
Most professional executors will be pleased to read this update, as a sale at a profit by the executors leads to the dilemma of whether it should be reported. Now, provided an RICS valuation was used for the probate value, it is quite clear that HMRC will not accept any increase in value so the dilemma is resolved.