Tax dodge of the week: falling house prices mean less IHT
If you sold a house you inherited for less than the probate value, you can claim tax relief.
With house prices falling, it is likely that people selling recently inherited properties will receive far less than the probate value. There is a special relief available to reduce any previous inheritance tax (IHT) charge, says The Wealth Protection Report. A special "loss on sale of land" relief can be claimed when the "appropriate person" sells an "interest in land" included in the deceased's estate within four years of the death. In such cases, you can claim the "sale value" should be swapped for the "value on death", cutting the property's value for IHT purposes. If IHT has already been paid in full, you will receive a refund.
Take a house valued at time of death at £500,000. It is sold 18 months later for £350,000. The executors claim relief (under IHTA84/S191 (1)) and the date of death value is cut to £350,000. Assuming no other assets, this would cut IHT from £75,200 to £15,200. To qualify, the price must have fallen by more than £1,000 or 5% from the probate value. Once relief is claimed, the sale price of all interests in land sold within the four years must also be switched for the date of death value.
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