IHTM30185 - Payment methods: payment by transfer of land or chattels

IHTA84/S230 and IHTA84/S231 contain provisions under which the Board of HMRC may accept land and chattels in whole or part payment of tax and interest. These provisions do not apply for the payment of tax prior to the issue of the grant (IHTM05011). This is often known as ‘Acceptance in Lieu’.

Any offer to transfer property under those provisions in satisfaction of tax, and any indication that an offer may be made, must be referred at once to Heritage, as also should any correspondence or enquiries on this topic.

Where any land transferred under IHTA84/S230 and IHTA84/S231 includes any trees or underwood in respect of which a IHTA84/S125 election has been made, the transfer is a disposal of the timber for the purpose of IHTA84/S126. Accordingly, the Inheritance Tax on the trees and underwood is payable immediately unless there has been an intervening disposition or death (IHTM04122). If this view is seriously challenged, you should refer the matter to Heritage as above.

Practice within HMRC

When property (land and chattels) is accepted in satisfaction of tax:

• A credit will be made to the accounting record for the case, equivalent to the ‘special price’ agreed for the property. You must apply this credit against the tax and interest due before (if necessary) applying any cash payments made by the liable persons. Remember that this may have implications for interest charged, depending on the date of the credit.
• If there is any excess credit remaining from the acceptance of the property it cannot be repaid. However, if any cash previously paid by the liable persons is no longer required following acceptance of the property, it can be repaid.

More details on the calculation of the interest charge when property is accepted can be found at IHTM30373.