Section 174 | Income tax and unpaid inheritance tax.

(1)In determining the value of a person’s estate immediately before his death, allowance shall be made for—

(a)any liability for income tax in respect of an offshore income gain, within the meaning of regulations under section 354(1) of the Taxation (International and Other Provisions) Act 2010, arising on a disposal which is deemed, under such regulations (see regulation 34 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)), to occur on the death; and^F1F2

(b)any liability to income tax arising under Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 (deeply discounted securities) on a transfer which is treated as taking place by virtue of section 437(2) of that Act.^F3F4F5

(2)Where in determining the value of a person’s estate immediately before his death a liability for inheritance tax is taken into account, then, if that tax or any part of it is not in the event paid out of the estate, the value of the estate immediately before his death shall be treated as increased by an amount equal to that tax or so much of it as is not so paid.^F6