IHT - reporting to HMRC and payment Flashcards
What is the duty of PRs regarding deceased’s estate?
Deliver an account to HMRC and pay any IHT due in respect of succession estate
What must be specified in the account to HMRC?
All property comprising the deceased’s taxable estate and value, any exemptions and reliefs
What is the deadline for submitting the account to HMRC after death?
12 months from the end of the month in which the death occurred.
What is the deadline for paying IHT after death?
6 months from the end of the month in which death occurred. After this, interest will accrue.
In practice, when is the account to HMRC typically done?
As soon as possible, as the grant will not be issued until IHT is paid
What is the instalment option for paying IHT?
- Can be paid by 10 equal annual instalments
- First instalment due by the usual deadline
- Remaining instalments due on each subsequent anniversary date
- Only used if there are insufficient liquid assets available prior to the grant being issued
- Only in respect of IHT due for land/shares/farms/business/timber - IHT payable on other property should be paid in full by the usual deadline
What is the IHT Account (IHT 400)?
Unless the estate is excepted, PRs have to report using IHT 400.
What are the two categories of excepted estate?
- Low value excepted estate
- Exempt excepted estate.
What defines a low value excepted estate?
One where there is no IHT payable because the gross value of the estate is below the NRB (this includes TNRB but does NOT include RNRB) - specified transfers and exempt transfers contribute to the gross value.
What defines an exempt excepted estate?
One where the gross value of the estate is no more than £3 million but no IHT is payable because, after deductions of debt and spouse/charity exemption is applied, the net value of the estate is below the NRB.
What checks must PRs perform for excepted estates?
PRs need to check no exception applies which prevents them from being excepted.
What are the exceptions preventing an estate from being excepted?
- gift with reservation of benefit
- Foreign assets cannot exceed £100k
- Only 1 trust valued at no more than £250k (not passing to a spouse)
- Specified transfers cannot exceed £250k
- claim for the RNRB.
What is IHT 400?
IHT 400 is a long form and supplemented by additional forms.
What is IHT 421?
The probate summary that lists assets passing under the grant rather than the IHT estate.
What is loss relief in the context of IHT?
Loss relief entitles PR to claim a partial refund of IHT where losses occur on sale of certain assets within prescribed time frames.
What is the Corrective Account Form C4 used for?
Used to inform HMRC about additional assets/liabilities discovered, corrections to values, changes to exemptions/reliefs, and variations of original beneficiary entitlements.
What can be done with the Corrective Account Form C4?
Pay additional IHT or claim a refund.
What is the Direct Payment Scheme?
Banks can be asked to make a direct payment from the deceased’s account to HMRC by telegraphic transfer under this scheme.
What is required for a bank to use the Direct Payment Scheme?
The bank must be a member of the British Bankers and Building Societies Association.
How can the main beneficiary raise funds to pay IHT if the direct payment scheme is not an option?
- By using funds outside the succession estate, such as money held in a joint bank account which passed by survivorship.
- by borrowing from a bank/beneficiary
