Inheritance Tax Act 1984 section 162C

Sections 162A and 162B: supplementary provision

Section 162C sets out how partial repayments of a loan are allocated when the loan was used to finance a mixture of excluded property, non-residents' foreign currency accounts, relievable property, and other property.

• Where a liability has been used to finance a mix of different property types and has been partly repaid, a statutory ordering rule determines which portion of the liability is treated as repaid first.
• Repayments are first treated as reducing the part of the liability not attributable to excluded property, foreign currency accounts, or relievable property — that is, the part that would normally be fully deductible is treated as paid off first.
• For death estates, the ordering then allocates repayments next to the relievable property portion, then the foreign currency account portion, and finally the excluded property portion.
• For all other cases (such as lifetime transfers), the ordering allocates repayments next to the relievable property portion and then the excluded property portion, with no separate foreign currency account category.