Broadly the options are:
- Land or buildings wherever situated.
- Business or business interest - net value of business assets (providing the business is carried on for profit).
- Quoted or unquoted shares or securities provided the deceased had control of the company.
- Other unquoted shares and securities normally where the transfer is on death and the IHT payable on these and other instalment assets is at least 20% of the tax chargeable.
- Other unquoted shares, but with various conditions.
The instalment option also applies to tax on failed PETs - that is to say on gifts made by the deceased which he failed to outlive by 7 complete years. Additional tax payable on chargeable transfers made in the deceased’s lifetime but which he failed to outlive by 7 complete years is also eligible.
The normal due date for payment of IHT in a deceased estate is 6 months after the end of the month in which death occurs. If an election is made by the Executors the tax due on instalment property is payable in 10 equal annual instalments, the first of which is the normal due date. However if an asset is sold any outstanding instalments become due “forthwith”.
Interest, currently at 2.60% per annum, is payable on some forms of instalment option property. Land & property (excluding most forms of agricultural property and woodlands) is caught but business assets are interest-free. For interest-bearing instalments there are two potential interest charges. The first is a charge for using the instalment facility, and applies each year on the whole amount of the tax outstanding. The second is a charge on any tax paid after the due date.
The instalment option is a valuable concession. For example it removes pressure on Executors to sell a property at a point when the property market is weak.
There is one aspect of Estate Planning which is sometimes overlooked. Normally the focus is on avoiding tax, reducing tax or deferring tax. A prudent person will also want to ensure that his Executors have sufficient in ready capital to pay tax which cannot be avoided, reduced or deferred.
C&H Stedman are available to help on all issues relating to deceased estates including payment options.
For more info, give us a call on 01442 202650