HMRC updates guidance on IHT treatment of specialty debts

Following discussions with professional bodies, HMRC has published updated guidance on the inheritance tax (IHT) treatment of specialty debts.

A specialty debt is:

• a debt made by deed; or
• a deed which records or creates obligations; or
• a debt incurred by way of statute; or
• a certain type of debt that is given the nature of a specialty debt by statute.

Historically, under common law rules the situs of a specialty debt was where the relevant documentation was situated.

In January 2013, HMRC made changes to the IHT manuals claiming that their initial interpretation was inaccurate and that specialty debts were likely situated in the debtor’s country of residence.

After further discussions with professional bodies HMRC has revised their guidance again, stating that the situs of specialty debts will depend on whether the specialty debts are secured or unsecured.


• where the debt is solely secured on land or other tangible property situated in the UK, HMRC takes the view that the situs of the debt will also be in the UK;

• where the debt is not secured the view of the Courts is that the situs of the debt is usually where the relevant deed or instrument evidencing the debt is found. HMRC generally adopts this approach to unsecured specialty debts;

• however, where the creditor and debtor are both resident in the UK, but the deed evidencing the debt has been removed from the UK, HMRC may choose to argue that the debt is nevertheless situated in the UK for the purposes of the IHT charge.

The revised sections of the IHT Manual can be found at IHTM27079IHTM27080 and IHTM27104.

For further information, please contact your usual Moore Stephens advisor.

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