Expenses and liabilities

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

This guidance note discusses the expenses and liabilities that can be deducted when calculating a transfer of value for inheritance tax purposes. It discusses the general principles applicable as well as specific provisions about deductions in the Inheritance Tax Act and the anti-avoidance legislation that has restricted deductions in some cases. This note also covers which asset the deduction for the liability can be taken from and how to deal with outstanding tax liabilities.

General principles

Expenses and liabilities will reduce the value of property to be charged to inheritance tax.

The deduction of liabilities is restricted in some circumstances by anti-avoidance legislation and these are covered below.

The value of any property for inheritance tax purposes is ‘market value’. The market value of assets is reduced by liabilities.

The practical application of these general principles to the valuation of property for IHT means that, for example:

•
the value of a death estate is reduced by the deceased's outstanding personal debts such as household bills and credit cards
•
the value of a gift

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