DEALING WITH HIS MAJESTY’S REVENUE AND CUSTOMS (‘HMRC’) Flashcards
HMRC’S REQUIREMENTS
The PRs have to deliver an account to HMRC within** 12 months** from the end of the month of the deceased’s death.
In practice, this normally happens before then, as interest on the inheritance tax due on the estate runs from six months—
and the PRs cannot obtain a grant until they have paid the
tax due.
SMALL ESTATES AND EXCEPTED ESTATES
Generally, estates of UK domiciliaries that do not exceed:
(1) The inheritance tax threshold (‘nil rate band’, presently £325,000), or
(2) £3 million, and the net chargeable estate (after deduct-ing liabilities and any spouse or charity exemption on death) does not exceed the inheritance tax thresholdare exempt from IHT and no formal account need be filed for the estate unless HMRC request one. An estate falling within (1) above is known as a ‘small estate’. An estate falling within
(2) above is known as an ‘exempt estate’.
Estates Using Transferable Nil Rate Band
The inheritance tax threshold can be increased to take account of transferred nil rate band from a predeceased
spouse or civil partner if, on the spouse or civil partner’s
death, some of all of their nil rate band was unused. The unused percentage can be transferred and added to the
threshold (seeTax chapter, below).
EXAMPLE
Gwen died in March 2020. Her assets were worth
£520,000, and she had debts of £40,000. Her will leaves everything equally to her two nephews. She had made life-time gifts of £80,000 to her nephews in June 2016. Gwen’s civil partner, Hannah, died in December 2018 and left her
entire estate to Gwen.
This is a** ‘small’ excepted estate. The aggregate of Gw-en’s gross estate (£520,000) plus her specifed transfers (£80,000) is £600,000, which is below the nil rate band
threshold of £650,000. The threshold is increased by 100%
from £325,000 as Hannah did not use any of her nil rate band on her death due to the spouse/civil partner exemp-tion.
COMPARE
Jason died recently. His gross estate was valued at
£900,000. He had debts of £300,000. His will leaves his estate to be split two-thirds to his wife, one-third to his daughter. Jason had made a lifetime transfer of £120,000 to his daughter three years earlier.
This is an ‘exempt’ excepted estate. The net chargeable estate (£900,000 - £300,000 debts - £400,000 spouse exemption + £120,000 specifed transfer) is below £325,000** and the gross value of the estate (£900,000) plus specifed
transfers (£120,000) is less than £3 million.
Non-UK Domiciliaries
The estate of a deceased who was non-UK domiciled is
excepted if their UK estate consists solely of cash and/or
quoted shares which do not total more than £150,000.**
