Administration: Reporting to HMRC and Paying IHT Flashcards
what are the duties of PRs in relation to HMRC and IHT? (2)
(1) Deliver an account to HMRC regarding the deceased’s assets
and
(2) Paying IHT due in respect of the deceased’s succession estate
are IHT account and payment done before or after applying for the grant?
BEFORE
a grant will not be issued until information about the estate has been provided to HMRC and IHT has been paid (BUT this is only the case if the estate is non-excepted)
what is the deadline for paying IHT to HMRC?
6 months from the end of the month in which the death occurred - after which interest is payable on the unpaid tax
example: If the deceased died on 15 March 2023, the IHT should be paid by 30 September 2023
what is the deadline for submitting accounts?
12 months from the end of the month in which the death occurred
example: If the deceased died on 15 March 2023 the IHT account would need to be submitted by 31 March 2024
why is it advisable for PRs to submit accounts and pay IHT ASAP? (2)
(1) grant will not be issued until info about estate is provided to HMRC and IHT is paid - and PRs cannot carry out administration before a grant is issued
(2) payment of interest after IHT payment deadline must be avoided
what information is included in the accounts delivered by PRs to HMRC? (5)
(1) all property in D’s taxable estate
(2) value of each item at date of death
(3) exemptions and reliefs that apply
(4) details of D
(5) signed by all PRs
when do PRs have to account to HMRC on the value of D’s estate before applying for the grant? what form is used when they have to account?
D’s estate is non-excepted = must account to HMRC using form IHT 400 and IHT 421. PRs must then wait 20 working days before they can apply for the grant.
D’s estate is excepted = PRs do not need to report to HMRC before applying for the grant - they will only provide info about estate value to the Probate Registry which will then send this to HMRC.
when is an estate not excepted? (8)
if any of the following things apply:
(1) D made a GROB in the 7 years before death
(2) D gave away £250,000 in the 7 years before death
(3) D had foreign assets worth more than £100,000
(4) D held assets worth over £250,000 in a trust
(5) D held more than one trust
(6) D left an estate worth more than £3 million
(7) D claimed RNRB
(8) D must pay IHT
when is an estate excepted?
if the estate is either:
(1) low value excepted estate, or
(2) exempt excepted estate
AND
all of the following 6 conditions are met:
(1) No GROB made in the 7 years before death
(2) foreign assets do not exceed £100,000
(3) D does not have more than 1 trust and its value does not exceed £250,000
(4) D did not make chargeable lifetime transfers in the 7 years before death worth more than £250,000
(5) D did not claim the RNRB
(6) the estate is valued at £3 million or less
what is a low value excepted estate?
no IHT is payable because the gross value of the estate is below the NRB
notes:
- NRB can include any TNRB from the spouse BUT NOT including RNRB
- gross value = total taxable estate (before deducting debts and applying exemptions or reliefs)
what is an exempt excepted estate?
the gross value of the estate is £3 million or less
AND
no IHT is payable because, after deducting debts and exemptions (spousal and charity ONLY), the net value of the estate is below the NRB
notes:
- NRB can include any TNRB from the spouse BUT NOT including RNRB
- only spousal and/or charity exemption can make the net value of the estate below the NRB for the estate to be excepted - no other exemptions can be considered
- debts alone and no exemptions cannot make the estate exempt
what is ‘gross value’ for purposes of determining whether an estate is excepted?
gross value = total taxable estate + certain specified transfers in 7 years before death + specified exempt transfers
specified transfers = chargeable lifetime transfers made in the 7 years before death comprising cash, chattels, shares, or land
specified exempt transfers = includes exempt gifts to spouses / CPs and charities
when do PRs have to notify HMRC of changes to the estate after submitting accounts and paying IHT? what form do they use
use form C4 if:
(1) PRs later discover inaccuracies,
AND
(2) too much or too little IHT was paid (either pay additional IHT or claim refund)
‘inaccuracies’ =
- additional assets and liabilities discovered
- change to the value of assets and liabilities from IHT 400
- changes to exemptions or reliefs
- changes in beneficiary entitlement affect IHT payable via variation or different Bs
what is the instalment option and when can PRs use it?
IHT due for CERTAIN ASSETD can be paid in 10 equal instalments (first instalment on usual deadline and the rest on the anniversary)
can only be used for IHT due on the following assets =
(1) land and buildings
(2) company shares / securities giving D control
(3) unquoted shares that did not give D control but where payment cannot be made without hardship
(4) farms or interests in farming business
(5) business or interest in a business
(6) timber
when is it advisable for PRs to use the instalment option?
use it only where it is required and only for long as it is needed
example:
- there are insufficient liquid assets to pay IHT before the grant is issued
- PRs want to avoid selling a qualifying asset (e.g., family home) which is needed if the value of other assets is insufficient to pay IHT
