PART VI

VALUATION
CHAPTER II

ESTATE ON DEATH

Discharge of liabilities after death
175A
1
In determining the value of a person's estate immediately before death, a liability may be taken into account to the extent that—
a
it is discharged on or after death, out of the estate or from excluded property owned by the person immediately before death, in money or money's worth, and
b
it is not otherwise prevented, under any provision of this Act, from being taken into account.
2
Where the whole or any part of a liability is not discharged in accordance with paragraph (a) of subsection (1), the liability or (as the case may be) the part may only be taken into account for the purpose mentioned in that subsection to the extent that—
a
there is a real commercial reason for the liability or the part not being discharged,
b
securing a tax advantage is not the main purpose, or one of the main purposes, of leaving the liability or part undischarged, and
c
the liability or the part is not otherwise prevented, under any provision of this Act, from being taken into account.
3
For the purposes of subsection (2)(a) there is a real commercial reason for a liability, or part of a liability, not being discharged where it is shown that—
a
the liability is to a person dealing at arm's length, or
b
if the liability were to a person dealing at arm's length, that person would not require the liability to be discharged.
4
Where, by virtue of this section, a liability is not taken into account in determining the value of a person's estate immediately before death, the liability is also not to be taken into account in determining the extent to which the estate of any spouse or civil partner of the person is increased for the purposes of section 18.
5
In subsection (2)(b) “
tax advantage
” means—
a
a relief from tax or increased relief from tax,
b
a repayment of tax or increased repayment of tax,
c
the avoidance, reduction or delay of a charge to tax or an assessment to tax, or
d
the avoidance of a possible assessment to tax or determination in respect of tax.
6
In subsection (5) “
tax
” includes income tax and capital gains tax.
7
Where the liability is discharged as mentioned in subsection (1)(a) only in part—
a
any part of the liability that is attributable as mentioned in section 162A(1) or (5) is, so far possible, taken to be discharged first,
aa
any part of the liability that is attributable as mentioned in section 162AA(1) is, so far as possible, taken to be discharged only after any part of the liability within paragraph (a) is discharged,
b
any part of the liability that is attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, taken to be discharged only after any
parts
of the liability within paragraph
(a) or (aa) are
is discharged, and
c
the liability so far as it is not attributable as mentioned in
any of paragraphs (a) to (b)
is, so far as possible, taken to be discharged only after any parts of the liability within
any
of those paragraphs are discharged.
Words in s. 175A(7)(b) substituted (with effect in accordance with Sch. 25 para. 3(8) of the amending Act) by Finance Act 2014 (c. 26), Sch. 25 para. 3(7)(b)(ii)
Word in s. 175A(7)(b) substituted (with effect in accordance with Sch. 25 para. 3(8) of the amending Act) by Finance Act 2014 (c. 26), Sch. 25 para. 3(7)(b)(i)
S. 175A inserted (with effect in accordance with Sch. 36 para. 5 of the amending Act) by Finance Act 2013 (c. 29), Sch. 36 para. 4
Words in s. 175A(7)(c) substituted (with effect in accordance with Sch. 25 para. 3(8) of the amending Act) by Finance Act 2014 (c. 26), Sch. 25 para. 3(7)(c)(i)
Word in s. 175A(7)(c) substituted (with effect in accordance with Sch. 25 para. 3(8) of the amending Act) by Finance Act 2014 (c. 26), Sch. 25 para. 3(7)(c)(ii)
S. 175A(7)(aa) inserted (with effect in accordance with Sch. 25 para. 3(8) of the amending Act) by Finance Act 2014 (c. 26), Sch. 25 para. 3(7)(a)