Loan and IHT

Chatty_lady2020

Morning All 
Can anyone answer this question for me, a family has lent another family member a considerable about of money I think it’s about 300k. The borrower has told the lender he cannot pay it all back due to the inheritance tax. As far as I am aware you only pay iht when the person has died and that comes off the estate. 

Is the borrower pulling a fast one? 

Thank you 

naedanger

Your understanding is correct.

As regards gifts, IHT is only ever paid after the donor has died and even then in most cases by the donor's estate.  (But it is possible in some circumstances that the receiver of the gift may have to pay IHT after the donor's death.)

However in the case of your family member the amount was a loan and not a gift so the receiver will never have to pay IHT on that amount. (And provided they return the money there can be no question that it was a loan rather than a gift they received.)

Pollycat

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

https://www.gov.uk/inheritance-tax