While the taxman tries to claw back his ‘lost’ two billion, it’s worth asking whether he owes you anything.
For example, with house prices threatening to fall further, those who have inherited estates recently could be due a rebate. Where inheritance tax (IHT) is calculated based on a property valuation at the date of death, but the house is sold within four years for a reduced price, you can reclaim any tax paid if you do so within 12 months of the sale, says Jennifer Hill in The Sunday Times.
If a relative died in August 2007 when the IHT threshold was £300,000 and their home was valued at £400,000, the IHT bill would have been £40,000 ((£400k-£300k) x 40% = £40,000).
But if the house is sold for £350,000 in December 2008, executors can claim IHT relief of £20,000 (40% x £50k). Any loss is a “bitter pill”, but reducing it by 40% makes it easier to swallow, says Paul Solomons of IHT-Solutions. Those who inherited share portfolios that have fallen can also claim a rebate.
The HMRC forms are IHT38 for property, IHT35 for shares.