IHTM05123 | Grants on credit: what circumstances will HMRC consider?

HMRC will only consider issuing a grant on credit in certain circumstances:

• When the Personal Representative (PR) is unable to raise all the funds to pay the tax due.

Sometimes there may be insufficient liquid assets in the estate to allow the PR to pay the tax due. In this situation we may consider postponing payment on delivery. Although the PR is expected to make every effort to raise the funds, from 1 April 2024 they are not required to seek commercial loans to pay the Inheritance Tax before applying to obtain a grant on credit from HMRC.

• When it is not in the interests of the Exchequer for the issue of a grant to be delayed.

We may also consider postponing payment on delivery if non-payment of the tax substantially delays the issue of a grant, and this is to the detriment of the Exchequer.

Example

Robert wants to apply for a grant of Letters of Administration for his aunt's estate. He knows the estate has a significant value, but the precise details cannot be obtained without the authority of the grant. The law says that a grant cannot be issued without paying the tax, but Robert cannot pay the tax. He cannot use the assets in the estate and does not have the means to pay the tax himself.

Without the grant there might be significant delay in settling the tax debt. This may put the Exchequer at risk of losing the tax, especially if the nature of the estate assets could alter in value. A grant on credit could be the key to breaking the deadlock and we should consider it as an option.

Non-resident Personal Representatives

On the other hand, you should not consider postponing payment of the tax due on delivery of an account by a non-resident PR without valuable security. For example, a first charge on immovable property with a value that is far more than the tax debt. Alternatively, a professional resident attorney could be appointed to make the application for probate on behalf of the non-resident PR. An attorney who takes out a grant is themselves personally liable for the tax – In re Rendell, Wood & Rendell [1901] 1 Ch 230. The non-resident PR also remains liable for the tax as a ‘person by whom or on whose behalf an application for a grant of administration…is made’, IHTA84/S272.

Each case must be considered on its own merits but a grant on credit should only be agreed where the PR is experiencing genuine difficulty paying the tax and has exhausted the sources of funding listed at IHTM05122 and it does not put the Exchequer at risk. Also, we have taken all possible action to ensure that the debt is paid as soon as possible after the grant (IHTM05127).

• When the PR has made all appropriate enquiries and made all the necessary arrangements to fund the tax due on delivery of the form IHT400 (IHTM10011). The PR becomes aware of an additional asset or information that suggests a different valuation for an asset already included at the last minute (but see IHTM05126).