RE403 - Interest paid: Loans for other purposes: Interest on loans to pay Inheritance Tax or Capital Transfer Tax
ICTA88/S364
The personal representatives of someone who has died may
take out a loan
- to pay the Capital Transfer Tax or Inheritance Tax on the personal property which has passed to them as personal representatives, or which would have passed to them if the property were in the United Kingdom. (Capital Transfer Tax/Inheritance Tax has to be paid before probate, letters of administration, or in Scotland confirmation is granted), or
- to pay off another loan on which relief for interest paid could have been given if it had not been paid off.
You should give relief for interest paid on the loan(s) against income of the personal representatives as such
- for any period of up to one year from when the loan(s) started
- in this order
- as far as possible against the income of the year in which the interest was paid, and
- any balance against income of the preceding year(s), and
- any remaining balance against the income of the following year(s).
If the personal representatives do not know how much of the loan
qualifies for relief they can get a certificate from the Capital
Taxes Office of the country where the grant was obtained (England,
Scotland or Northern Ireland).
No tax relief is available for interest paid because of late
payment of Capital Transfer Tax or Inheritance Tax, but where it is
paid by Trustees see TM2020.
