Deceased Mother borrowed money from Son

executor

Hi all

Second time executor here and notice that there has been a tightening up of the inheritance tax form relating to debts owed by deceased -IHT 419. Wondered if anyone has had experience of a scenario where deceased has borrowed money from someone they had previously gifted money to. Could this outstanding loan still be deductible for IHT purposes?

The facts are the mother (now deceased) borrowed £10k from son to help cash flow purchase of her home following divorce. Due to her age she was unlikely to get a mortgage and pending payment of divorce settlement wanted to buy her own property after a decade living in rental accommodation. A combination of pension lump sum, sale of shares, personal loan from bank and sum borrowed from son were used.

The son was a uni student only a few years prior to this event and of course as would be fairly normal had received occasional gifts and some financial support from the mother, probably amounting to a few thousand pounds.

It seems absurd to me that such an innocent loan would not be deductible for IHT due to prior gifts, when clearly the purpose is not tax avoidance. I had intended initially to pay repay the loan prior to or shortly after submitting IHT account to prove it's validity, but not so sure this is the correct approach now unless I have gotten hold of the wrong end of the stick completely!

Form 419 states:
Gifts to, and loans from, the same person
In some cases, special rules apply where the deceased
has both borrowed money from someone and made a gift to that same person. These types of debts owed by the deceased are generally not allowed as deductions for Inheritance Tax purposes.

What are these 'special rules'? Any thoughts on this are very welcome. I have asked a solicitor with probate experience but they were stumped on this as it's a new change. Thanking you.