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.