Q&As

The deceased’s estate includes a debt (plus indexation) which is owing to a nil rate band discretionary trust established by the deceased’s predeceasing spouse. If the debt is not repaid, is it deductible for inheritance tax purposes? Do trustees pay income tax on the indexation element of a loan?

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Published on LexisPSL on 15/10/2018

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • The deceased’s estate includes a debt (plus indexation) which is owing to a nil rate band discretionary trust established by the deceased’s predeceasing spouse. If the debt is not repaid, is it deductible for inheritance tax purposes? Do trustees pay income tax on the indexation element of a loan?

The deceased’s estate includes a debt (plus indexation) which is owing to a nil rate band discretionary trust established by the deceased’s predeceasing spouse. If the debt is not repaid, is it deductible for inheritance tax purposes? Do trustees pay income tax on the indexation element of a loan?

The response to this Q&A is predicated on the basis that the factual scenario envisaged is the same as the specific avoidance scheme known as the debt and charge scheme (as set out at IHTM44107).

The deductibility of the debt on the deceased’s death will depend on all the facts and circumstances of the case (eg how the property was originally purchased or whether consideration was provided).

Refer to our Practice Note: IHT—deduction of

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