Reporting to HMRC and Payment of IHT/Applying for Grant

Question 1

What duty to PRs have in relation to HMRC?

Answer 1

They have a duty under s 216 IHTA to:

• deliver an account to HMRC regarding the deceased’s estate
• pay any IHT due

Question 2

What does the account PRs deliver to HMRC have to specify?

Answer 2

• all of the property comprising the deceased’s taxable estate immediately before death and the value of each item at the date of death
• the exemptions and reliefs that apply

Question 3

What is the account provided to HMRC the basis for?

Answer 3

The basis of the amount of IHT due or not due

Question 4

What is the deadline for submitting the account to HMRC?

Answer 4

12 months from the end of the month in which the death occurred

Question 5

What is the deadline for paying IHT?

Answer 5

6 months from the end of the month in which the debt occurred

After which interest becomes payable on the unpaid tax

Question 6

Why will PRs want to submit the account and pay the IHT due as soon as possible?

Answer 6

• the grant will not be issued without it
• to avoid paying interest on unpaid IHT past the deadline

Question 7

What is the instalment option for paying IHT?

Answer 7

Can opt to pay IHT in 10 equal annual instalments with the first instalment due by the usual deadline and the remaining instalments are due on each subsequent anniversary date, with interest charged on any IHT that remains outstanding after the initial deadline date

Question 8

When is the instalment option available?

Answer 8

Available in respect of IHT attributable to the following assets:

• land and buildings
• company shares/securities giving the deceased control
• some unquoted company shares/securities that did not give control but where payment cannot be made without undue hardship
• farms or interest in a farming business
• business or interest in a business
• timber

Question 9

What happens if the property to which instalment option applies is subsequently sold?

Answer 9

Then the instalment option ceases in relation to that property.

Outstanding IHT on that property is due immediately and the sale proceeds are available to meet this liability

Question 10

When must form IHT 400 be completed and what does it detail?

Answer 10

Details estate assets and liabilities

Need to be completed unless estate is excepted

Question 11

What is the IHT 421 form?

Answer 11

Probate summary that contains details about the deceased and a summary of the gross/net succession estate

Question 12

When must corrective accounts by a Form C4 be filed with HMRC?

Answer 12

When PRs discover later that the IHT 400 and too much or too little has been paid

New calculation of IHT will be due too

Question 13

What is the Form C4 used for?

Answer 13

To inform HMRC about:

• additional assets/liabilities discovered after the IHT 400 was submitted
• corrections to the value of assets/liabilities originally included in the IHT 400
• changes to exemptions/reliefs applied - eg an increase or decrease in value or where there were not claimed or due
• a variation of the original beneficiary entitlements which affect the IHT liability eg changes in the value of what an exempt beneficiary receives

Question 14

How can PRs raise money to pay IHT?

Answer 14

• direct borrowing scheme
• borrowing

Question 15

What is the direct payment scheme for paying IHT?

Answer 15

Banks or building societies that hold accounts in the name of the deceased can be asked to make a direct payment from the deceased’s account to HMRC by telegraphic transfer under Direct Payment Scheme

Question 16

How does borrowing work for paying IHT?

Answer 16

PRs can borrow either from a beneficiary or bank

Question 17

When will the Probate Registry issue a grant of representation?

Answer 17

When they are satisfied that the applicants can demonstrate they are entitled to it and when they have sufficient information about the deceased’s estate

Question 18

How can information be given to the Probate Registry?

Answer 18

Either by

• completing and then posting a paper application form to the Probate Registry
• submitting an online application via HMCTs service and answering the relevant questions

Question 19

When is it mandatory for professional applicants to make an online application?

Answer 19

For most grants of probate

Question 20

When is it mandatory for professional applicants to make a paper application?

Answer 20

For non-standard grants and more complicated applications eg:

• second grant eg to an executor who previously reserved power
• grants to a PR where the chain of representation applies
• grants where original Will is missing or there are issues with the Will
• Grants to attorney
• Grant under NCPR 20 if life interest arises

Question 21

If a paper application to the Probate Registry what forms must be completed?

Answer 21

• PA1A if the deceased did not leave a Will
• PA1P if the deceased left a valid Will

Question 22

In making the application for a Grant to the probate registry, what must applicants do?

Answer 22

They must:

• confirm the identify of the deceased and the applicants
• justify the type of grant requested and their entitlement to act as PR
• provide information about the value of the estate and IHT status of the estate
• complete the legal statement on the probate form confirming the information provided is correct and that they will administer the estate properly

Question 23

How should the identity of the deceased and the applicants be confirmed to the probate registry in the application?

Answer 23

• deceased’s full name as per death certificate, date of birth and death
• deceased’s last usual residential address
• deceased’s domicile, marital status and value f foreign property
• if deceased owned assets in another name then these should also be stated
• applicants full name, address and contact details are included

Question 24

How should executors prove their entitlement to act to the probate registry in the application?

Answer 24

They must submit the Will that gives them their authority so it can be confirmed as valid

Question 25

How should administrator’s applying for Letters of Administration (with Will) prove their entitlement to act to the probate registry in the application?

Answer 25

Applicants under NCPR 20 should:

• state which category they fall in with reference to the Will
• clear-off anyone with a better right to apply (but not those with equal right)
• state whether any beneficiary is a minor or if any life interest arises (in which case two administrators are needed)

Question 26

How should administrator’s applying for Letters of Administration prove their entitlement to act to the probate registry in the application?

Answer 26

• state their familial relationship to the deceased/identify which category of applicant applies and confirm they are entitled to the whole or part of the estate
• clear-off anyone with a better right to apply
• state whether any beneficiary is a minor

Question 27

What are the two categories of excepted estate for those that are domiciled in the UK?

Answer 27

• low value excepted estate
• exempt excepted estate

Question 28

When is an estate low value excepted?

Answer 28

A low value excepted estate is one where there is:

• no IHT payable, and the reason for this is because
• the gross value of the estate is below the NRB

Question 29

When is an estate an exempt estate?

Answer 29

An exempt estate is one where:

• the gross value of the estate is no more than £3 million but
• no IHT is payable, and the reason for this is because
• after debts are deducted and spouse and/or charity exemption are applied the net value of the estate is below the NRB

Question 30

What must applicants tell the Probate Registry in relation to the IHT status of the estate?

Answer 30

• if an IHT 400 was completed, the applicants must confirm this has been sent to HMRC and the IHT due was paid. HMRC will confirm this to the Probate Registry. The Probate registry will not issue a grant before receiving confirmation from HMRC that tax was paid
• if the estate is an excepted estate then applicants need to include gross and net values of the taxable estate

Question 31

What is the legal statement that applicants must make to the probate registry?

Answer 31

They confirm by signing that they will comply with their duties under s 25 AEA and that the contents of the form are true

Question 32

When will a Probate Registry Fee not be payable?

Answer 32

When the estate is less than £5,000

Question 33

How many copies of the Grant should applicants make?

Answer 33

They should make one per asset holder and couple of spare copies

Question 34

Must original Wills and any codicils be submitted with applications for grant?

Answer 34

Yes if valid Wills and codicils that apply to that Will (and any codicils that amended that will but have subsequently been revoked) then they should be submitted

Question 35

When might an affidavit need to be submitted with the application for a Grant?

Answer 35

When there is a valid Will but there is somethings about it which renders its validity uncertain

Question 36

When will an affidavit be required for s 9 requirements on applying for Grant?

Answer 36

Where the PR believes the Will is valid but it is not clear the execution requirements set out in s 9 WA have been complied with

Question 37

When will an affidavit be required for knowledge and approval requirements on applying for Grant?

Answer 37

If there is reason to doubt that the testator had knowledge and approval then one of the witnesses confirms the circumstances in which the Will was executed

Question 38

When will an affidavit be required for confirming the date of a Will on applying for Grant?

Answer 38

When there is some doubt as to the date the Will was executed then a affidavit of due execution may be required by one of the witnesses to confirm the correct date

Question 39

What should happen if the original Will is missing?

Answer 39

A copy of a Will may be submitted for Grant if court order approving this. An affidavit may be required for the court order detailing:

• evidence that the Will/codicil existed after the deceased’s death (or facts which rebut presumption that the missing Will was revoked during the testator’s lifetime)
• confirmation the Will/codicil was correcting executed
• that the copy document submitted accurately records the testamentary wishes of the deceased