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Replies to Queries - The family silver

03 March 2005
Issue: 3997 / Categories:

A client inherited a number of family heirlooms many years ago under the rules giving conditional exemption for IHT purposes.
He has recently sold one of these items, a medal awarded for gallantry to one of his ancestors, the sale proceeds being around £100,000. It is believed that the value at the time of inheritance was agreed to be relatively low, but he is not sure of the exact figure.
What are the implications for IHT and CGT purposes?
(Query T16,564) — Medallion Man.

A client inherited a number of family heirlooms many years ago under the rules giving conditional exemption for IHT purposes.
He has recently sold one of these items, a medal awarded for gallantry to one of his ancestors, the sale proceeds being around £100,000. It is believed that the value at the time of inheritance was agreed to be relatively low, but he is not sure of the exact figure.
What are the implications for IHT and CGT purposes?
(Query T16,564) — Medallion Man.


There can be no question of capital gains tax by virtue of TCGA 1992, s 268 ('decorations for valour or gallant conduct'). On the face of matters, by virtue of IHTA 1984, s 32(3)(b), the sale will have constituted a chargeable event for inheritance tax purposes, giving rise to tax at the death rate on the proceeds of sale net of expenses. However, there would seem to be a good chance that IHT will be waived. Reference should be made to the guidance that was given under the heading 'Details' in paragraphs 4 and 5 of the Revenue press release dated 21 August 2000 introducing the current IHT Extra-Statutory Concession F19 ('Decorations awarded for valour or gallant conduct'). These paragraphs read as follows.

'4. The concession regularises a broadly similar existing informal practice — whereby honourable decorations that had been bestowed on a deceased individual or a member of his or her family were exempted from IHT. It will be effective from today and will apply to all cases yet to be settled. Any settled cases where the previous informal practice was not applied will be considered on their merits, if brought to the attention of the Capital Taxes Office.
'5. All enquiries about this concession in particular cases should be directed to — Heritage Section, Capital Taxes Office, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB...
'Please provide the full name of the deceased or transferor and date of death or transfer plus the CTO reference number if known. Please give full details of the decorations awarded (for valour or gallant conduct) and evidence of their value and the tax charged at the date of the chargeable occasion.'

Presumably Medallion Man will write to the Heritage Section pointing out that had the 'previous informal practice' referred to above been applied on the death of the deceased, then a claim to conditional exemption in relation to the medal would never have been pursued in the first place. This being so, there would seem little merit in imposing the prima facie IHT recapture charge pursuant to IHTA 1984, s 32(3)(b).

Issue: 3997 / Categories:
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