Daniel Watson calls to extend the IHT loss relief window for the sale of investments in Taxation

Daniel’s article was published in Taxation, 9 May 2023, and can be seen here.

Daniel Watson, Associate in our Private Client department, highlights the growing challenges faced by executors and beneficiaries due to significant delays in the probate process.

The Probate Registry has recently doubled its estimated processing time for probate applications from eight to 16 weeks, with some paper applications taking over 20 weeks. These delays are attributed to a shift toward online applications, closure of regional registries, and administrative errors such as mis-scanned wills or delayed confirmations from HMRC.

As a result, it is now common for the probate process to extend beyond six months, and in more complex estates, over a year from the date of death.

A key concern arising from these delays is the impact on inheritance tax (IHT) loss on sale relief. This relief allows estates to reduce their IHT liability if investments are sold at a loss within 12 months of death. However, with probate grants often delayed beyond this window, executors may be unable to sell investments in time, resulting in a lost opportunity to claim the relief.

Daniel supports calls to extend the relief window to 18 or even 24 months, aligning it more closely with the four-year window available for land sales. Without such reform, beneficiaries may face unfairly high tax bills due to systemic delays, effectively creating a stealth tax on bereaved families.

Read the full article on the Taxation website [subscription required].