The IHT Double Discount that almost no one knows about

As legal practitioners, estate administration experts or probate providers, you will often see and deal with a number of property questions and issues. In this short article,?Bill Wilkinson?– Founder of Wilkinson and Fox shares some guidance and information on the IHT discounts that almost no one knows about.

Most common discounts

Most practitioners that we deal with estate administration know about the 10% and 15% discount for shared ownership.

For those that don’t know, there was a case heard by the Land Tribunal in 1997 between Charkham v CIR. This case set a communally accepted precedent that where the deceased co-owns a property as tenants in common with a party other than their spouse or civil partner there will be a discount applied to the deceased’s share of the property. The level of discount will depend on the co-owners’ status and if the other owner lives in the property.

For co-owning married couples or civil partners, it’s important to note that if a share of the property is transferred into a discretionary trust on the first death then we have been able to apply a 10% discount to the surviving spouse’s share of the property upon the second death (as opposed to if the property had passed to the surviving spouse directly). Ownership by the trust does not mean that the surviving spouse cannot benefit from the property i.e. by occupation or income, but the trust must be set up correctly in the Will of the deceased spouse.

Other less well-known discounts that should be considered

The first question that should be asked is: Was the property tenanted as at the date of death?

If it was, then case law from the Land Tribunal (Akanwo (as personal representative for the estate of Akanwo Deceased) v Revenue and Customs Commissioners) might apply. This case has been a widely accepted precedent of a 5% discount being applied to the Open Market Value (OMV) to account for the property not being able to be sold with vacant possession as at the date of death.

There are some caveats and things to watch out for with the above. These are:

• How long is left on the lease
• The type of tenancy
• Whether the whole property is tenanted or only a part of it

The double discount

If the property was tenanted, and the date of death was after 29th August 2020, while the Coronavirus Act 2020 was in force, then we have been able to apply an additional 5% discount to the OMV. This is to account for the property not being able to be sold with vacant possession and Landlords not being able to take back possession. Although we have not had this tested at the Land Tribunal, we have had it scrutinised by HMRC and the District Valuer’s Office.

Why use a RICS Red Book Valuation?

Not all practitioners know about these discounts, and next to no non-professional valuers do. Even if you have a valuation that complies with Section 160 of The Inheritance Act 1984 it does not mean all factors have been fully considered. If you want a property professionally valued and all relevant discounts considered then please do enquire about our services. We are not just valuers, we are probate specialists.

This article was written by Bill Wilkinson of?Wilkinson & Fox.

We hope you have found this article informative, and we would be happy to answer any questions or discuss any issues with you. Please do not hesitate to contact us or connect with our founder Bill Wilkinson on LinkedIn.