IHTM28150 | Liabilities: investigating liabilities: income tax

From HM Revenue & Customs · Inheritance Tax Manual

You should check that any deduction claimed for income tax liabilities

  • has been calculated correctly, and

  • does not indicate that business assets or income-producing assets have not been included in the estate.

In most cases you can accept a deduction for income tax as claimed. But you may need to raise further enquiries if:

  • the deduction is large () in relation to the estate as a whole or inconsistent with what you know about the deceased’s lifestyle

  • the liabilities arise as a result of an investigation settlement ()

  • the deduction claimed is an estimate ().

You also need to take special care when dealing with deductions claimed for income tax payable on:

  • the disposal of an offshore fund ()

  • the disposal of deep discount securities ()

  • interest bearing securities

  • sums received following the discontinuance of a business ()

  • the death of a partner in a business ()

  • voluntary payments of tax by the personal representatives ()

  • the chargeable gains arising when a life insurance policy matures ().