IHTM15042 | The extent of the share (England, Wales and Northern Ireland): Joint money accounts

From HM Revenue & Customs · Inheritance Tax Manual

Applying the Inheritance Tax provisions (IHTM15012) to joint accounts can be particularly difficult. In practice:

You should normally regard each account holder as beneficially entitled (IHTM15011) to the proportion of the account which is attributable to their contributions. So - if the deceased provided the whole of the money, the whole of the account at death should be included in the IHT400 (IHTM10021)
When calculating this proportion you should assume that any money withdrawn by each person should be set as far as possible against their own contributions, despite, the rule in Clayton’s Case [1816] 1 Mer 572
You may want to make enquiries about any withdrawals made from funds the deceased provided by the other joint owner(s) as these are likely to be lifetime transfers (IHTM15043). You should pay particular attention to joint accounts opened shortly before the death.
In most cases each joint owner has an unrestricted right to withdraw any part of the amount in credit in the account and keep the funds for their own use (for example, see Re Bishop [1965] Ch 450). You should not use the fact that this right exists to argue that tax is due (for example, by referring to the definition of ‘property’ in IHTA84/S272 or the ‘general power’ provision in IHTA84/S5(2)) on a share of the account that is greater than the share provided by the joint owner.
When establishing the share based on the deceased’s contributions you should note that the true legal position is far from clear so it is important to establish the facts and obtain any relevant documents, such as application forms, withdrawal mandates, passbooks, terms and conditions of account before considering the legal and equitable rules. Where the account holder has a joint account governed by Scots Law you should consider the guidance at IHTM15051 and IHTM15054. Refer to Technical any case in which the taxpayer or agent disputes the claim. Remember you do not need to consider the question if the deceased’s interest passes to an exempt beneficiary, such as a surviving spouse or civil partner (IHTM11032). You should also avoid enquiries on this subject unless the amount of tax at stake is substantial.

Example

Andrew, Bill and Claire share a joint account. They all contribute to it. Andrew dies and his proportion of the account passes by survivorship to Bill and Claire. After Andrew’s death, the entitlement of Bill and Claire should take into account Andrew’s contributions.

For a discussion of the approach to a joint account in a contentious case see O’Neill v IRC [1998] STC (SCD) 110 and Aroso v Coutts & Co [2001] WTLR 797.