I3.614 Tax credit for IHT against chargeable gains following hold-over relief
As discussed in I3.611, there are occasions when an immediate CGT liability may reduce the value transferred by a chargeable transfer. It is possible that the CGT liability arising on a chargeable transfer inter vivos is not paid at that time but is held over under either TCGA 1992, s 165 (see I3.612) or TCGA 1992, s 260 (see I3.613), until the donee disposes of the property or ceases to be resident (or, before 6 April 2013, ordinarily resident) in the UK1. In these circumstances, the value transferred cannot be reduced by the CGT liability since that liability has not crystallised at the relevant time. When, however, that liability does crystallise by reason of the donee's disposal of the property (ie not on his emigration), the donee's chargeable gain will be reduced by the IHT attributable to the property (whether that IHT was paid by the donor or by the donee) up to the amount of the chargeable gain2. This means that the credit for IHT may eliminate the chargeable gain but cannot create or augment an allowable loss. The relief is mandatory and no claim is required3.
Where an amount of IHT is varied after it has been taken into account to reduce a chargeable gain, all necessary adjustments (either to reduce further or increase the chargeable gain) are made whether by the making of an assessment to CGT or by
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