Your Right to Claim Tax Relief on Losses Dies With You
You can claim tax relief if assets that you have acquired become worthless or loans that you have advanced prove to be irrecoverable. However, in a case that will be required reading for tax professionals, the Upper Tribunal (UT) has ruled that the right to claim such losses for tax purposes does not survive your death.
An investor had bought shares in two companies that became valueless and had made a loan of more than £330,000 that had to be written off. He died in a motoring accident before he could claim tax relief on either loss. The executors of his estate sought to claim relief after his death but met resistance from HM Revenue and Customs (HMRC).
The First-tier Tribunal initially allowed the executors’ appeal and found that £40,000 of the loss made on the shares could be deducted from the investor’s income in the year before his death. It also ruled that the executors were entitled to carry forward the loss made on the loan and set it against capital gains in subsequent years.
In overturning those rulings, the UT upheld HMRC’s argument that, in order to claim relief, the shares had to be owned by the investor on the date when they became of negligible value and still owned at the time of the claim. Furthermore, it was the investor, not his executors, who made the loan and the money was owed to him when it became irrecoverable. Only the investor himself could thus have claimed relief. […]