Acting as an Independent Administrator and securing Business Relief from Inheritance Tax

Our Trust Corporation was appointed by the Court under section 50 Administration of Justice Act 1985 to be the Independent Administrator of the estates of a husband and wife, following settlement of litigation involving the beneficiaries of the two estates.  Upon receipt of the grants of representation we started encashing the estates’ remaining live assets with a view to obtaining tax clearance and finalising the estates’ administrations generally, after which they would be distributed in accordance with the Court’s order.

We discovered that the husband’s estate comprised a valuable business which passed to his wife’s estate under his will, although it still formed part of the husband’s unadministered estate at the time of the wife’s death.  The business had been valued at both the husband’s death and the wife’s death, but it was only chargeable to Inheritance Tax  (IHT) in the latter’s estate.  The business had been reported as not eligible for Business Relief (BR) on both occasions and it was clear that this was correct both historically and as of the husband’s death.   However, upon examining the accounts over a period of years in detail it appeared to us that there had been a significant change in the management, strategy and direction of the business following (and precipitated by) the husband’s death.  Drawing on the input of other professionals we formed the view that the change in the business’s approach was such that, by the time of the wife’s death, it had become a trading company for the purposes of BR.  We drafted a retrospective claim for BR and clearance from HMRC on that basis.

After a long period of negotiations with HMRC we successfully established that the business had become a trading company by the time of the wife’s death and, therefore, BR was available.  Moreover, we secured a refund of just under £1,300,000 for the estate to the benefit of the residuary beneficiaries.  This estate was a reminder of the importance of a detailed analysis of accounts and ensuring these properly reflect how they have been reported and the tax reliefs and / or exemptions which are available.

If you have any questions about Independent Administration, please get in touch with our expert Probate team.