Revenue & Customs Brief No 23/08

Inheritance tax and valuation of gifts involving a Discounted Gift Scheme

HM Revenue & Customs (HMRC) has given notice of appeal to the High Court against the decision of Special Commissioner in the case of the Executors of the Estate of Mrs Marjorie Edna Bower (deceased) and the Commissioners for HMRC.

This brief sets out how, pending the outcome of the appeal, HMRC will deal with cases involving a gift for Inheritance Tax (IHT) purposes involving a Discounted Gift Scheme (DGS) where the settlor is older than 90 next birthday (actual or deemed) or is considered to be uninsurable as at the date of the gift. HMRC published a Technical Note (PDF 45K) in May 2007 confirming its long held practice.

When an IHT chargeable event arises, the value of any gift element of a DGS is considered by the Actuarial Team of HMRC. Open cases already being considered by the Actuarial Team will remain under review pending the outcome of the current litigation.

New cases will continue to be dealt with in accordance with the May 2007 Technical Note. Where the Actuarial Team consider (in calculating the value of the gift element) that the value of retained rights is only nominal (because of age of the donor or because the donor is considered to be uninsurable) we will advise those liable for the IHT accordingly, explain that we will not press for payment of the additional IHT for the time being, and suggest they consider putting an appropriate sum on account to stop (further) interest accruing on any IHT due.

This will enable cases to be progressed as far as possible pending the final outcome of the litigation, while safeguarding the position of taxpayers,.

If you have any questions related to this matter please refer them to:

Phil Oxlade
Board’s Actuarial Officer
Charity, Assets and Residency
Actuarial Group
Ferrers House
PO Box 38
Castle Meadow Road
Nottingham
NG2 1BB

Tel 0115 974 2950

Issued 11 April 2008