When the assets in an assessment group (
IHTM31012) are exceeded by the value of
the liabilities, a deficit occurs.
You can spot a deficit by looking at the relevant section of
the HMRC Account (
IHTM10011), or when you review the
figures to raise an assessment. If you are raising an assessment on
COMPASS, it will recognise the deficit and warn you with a
message.
You must calculate the deficit manually and deduct it against
the appropriate assessment group(s) to ensure that it is correctly
accounted for.
You can only offset a deficit against another assessment
group within the same Entry (
IHTM31011). You cannot offset it
against another Entry. For example, you cannot offset a free estate
deficit against a will trust or a lifetime transfer.
In the case of free estate, check whether the will (if there
is one) gives any directions how liabilities are to be met. If they
are to be set against personal property, bear in mind that some IOP
assets, such as businesses, partnerships and shares, are personal
property (in Scotland, moveable estate) and will bear the deficit
before any land.
If you need to take the deficit against all or some of the
IOP assets, you will need to calculate (and apportion if necessary)
the figure manually and record it as a liability/creditor against
the IOP assets.
When offsetting deficits against IOP assessment groups, where
tax on some of the assets are paid by instalments and some are not,
apportion the deficit against
each asset to produce an accurate assessment.
Amendments
Remember that if the amount of the deficit changes, you need
to change the amount of the liability or Creditor set against the
other assessment group.
