With house prices falling sharply over the last few years, it is possible that people selling inherited property or land will receive a lot less than the probate value.

The Wealth Protection Report notes that a special “loss on sale of land” relief can be obtained when the “appropriate person” sells an “interest in land” which is included in the estate of the deceased within four years of the death. The result is that the “sales value” can be swapped with the “value on death” and as a result reducing the property value for inheritance tax purposes. If you have already paid the tax, you are eligible to claim a tax refund in full.

For example take a house which was valued at the time of death at one million pounds. If it is sold 18 months later for 700,000 pounds the executors can claim relief under IHTA84/S191 (1) and the date of death value is cut to 700,000. Assuming there were no more assets within the estate, this would cut the inheritance tax bill by 130,000 pounds!

One caveat to note is that in order to qualify, the price of the property must have fallen by more than 1,000 pounds or 5% from the probate value.