It is my understanding that in the absence of valuable consideration or an estoppel, the release of a debt, liability or obligation must be effected by deed; see Practice note, Execution of deeds and documents: When do you need a deed? Releases and variations.

On this basis, I think that the gift will be completed once the deed of release/waiver is completed; see also Ask, When is a gift completed?

The following Ask responses may also be of interest:

Thanks.

I failed to tell you that the person who lent the money has died. I am preparing the IHT form.

I am not sure whether to put down the dates and amounts of the gifts as at the dates the loans were made or add them all together and put the total value of the loans as gifts on the day the deceased told her (now executor) that she wasn’t going to pursue them.

Please confirm

I think that you would find it helpful to look at the first of the previous Ask replies that Caroline refers to in her email, which discusses the distinction between a loan and a gift (although that example is in a trust context, the same principles apply).

The previous reply explains that HMRC will not accept that a debt has been waived unless there is evidence of an effective waiver in the form of a deed (referring to HMRC: Inheritance Tax Manual: IHTM19110). So my understanding is that you will first need to establish whether the debt has been effectively waived. If it has, the date of the waiver will be the date of the gift by the creditor to the debtor. If there has been no effective waiver, my understanding is that HMRC will treat the debt as remaining as part of the deceased creditor’s estate for inheritance tax (IHT) purposes, even though the deceased intended to waive it.

For HMRC’s full guidance on debts due to an estate, see IHTM19000: Capital debts due to the estate: contents.

If the facts are that the deceased intended to transfer the funds as a loan on the date of the transfer, and only later decided to waive the debt, then she would not have made a gift on the date of the transfer. It will be a matter of evidence as to whether she made loans or gifts on that date. It is only if you conclude that, on the facts, the deceased actually made a gift at the outset, and not a loan, that the date of that transer will be the date of a gift.

You may want to consider separately whether the debt owed to the deceased is itself enforceable. If it isn’t, it may be possible to argue that it shouldn’t be included as an asset of the estate even if it hasn’t been waived. HMRC allows a reduced figure to be included if it is not reasonably possible to obtain repayment of a debt, but you would need to provide reasons for this (see IHTM19010).

If you are uncertain about how the debt should be treated, you could explain the circumstances in Schedule IHT416 to the IHT400. This states that if the circumstances are not straightforward, you can include an explanation in the "Additional information" box on the IHT400 itself. (For links to the forms, see Practice note, HMRC Inheritance tax accounts resources: Estates where a full account is required.)

Thanks Carol.