It is often the case that taxpayers (
IHTM09000) or their agents will
approach IHT for removal of a formal charge or caution when a sale
is arranged, and they wish to complete the sale with clear title
(i.e. one free of any HMRC charge).
As outstanding tax and/or interest will often be discharged
from the proceeds of sale you may need to come to an arrangement
with the taxpayers for removal of the charge or caution subject to
certain conditions.
This often takes the form of an undertaking to be provided by
the vendors’/taxpayers’ solicitors, who may not
necessarily be the solicitors dealing with the administration of
the estate. The form of the undertaking will vary according to
circumstances, but in all cases you should endeavour to obtain an
undertaking after contracts have been exchanged and before
completion of the sale.
To assist the taxpayers or their agents you can agree the
form of an undertaking before exchange of contracts and accept
delivery after the contract has been exchanged.
If you know the final amount of the tax and/or interest
outstanding, and the liability is less than the net proceeds of
sale, you can accept an undertaking for that amount.
If the net proceeds (after any prior charges) do not cover
the outstanding liability, you should seek an undertaking for the
whole of the net proceeds (after any prior charges are satisfied
and costs of sale are met).
In the more complex cases, a sale may occur before you know
the amount of tax and interest due. In that situation negotiation
of the terms of an undertaking may be difficult. One solution, not
always acceptable to the parties, is for the vendors’
solicitors to provide an undertaking that they will hold the entire
net proceeds of sale (after any prior charges) to the order of
HMRC. In practical terms this means that the solicitors will hold
the net proceeds of sale in their client account until HMRC
releases them from their undertaking. Such release can occur in
stages - as the administration of the estate proceeds and HMRCs
requirements are satisfied or as it becomes evident that all of the
net proceeds will not be required to discharge an IHT debt. If the
parties seek a partial release, you should consider giving
appropriate authority if the Exchequer is not likely to be put at
risk.
Less commonly, an undertaking may be given by the vendors'
solicitors to the purchasers’ solicitors that the notice will
be removed. IHT is not involved in such undertakings, and when they
are given IHT is often under pressure to cancel the notice.
You should only remove the charge/caution when all the
outstanding tax and interest has been paid, or when sufficient
money from the proceeds of sale is guaranteed towards satisfaction
of the debt.
