Administration - Reporting to HMRC & Payment of IHT

Question 1

What are PRs required to do under s.216 Inheritance Tax Act

Answer 1

• Deliver an account of the deceased’s estate to HMRC
• Pay any IHT due on the succession estate

Question 2

How is IHT calculated?

Answer 2

• Add estate value
• Deduct liabilities and apply reliefs
  Tax:
• 0% on the nil rate band (NRB)
• 40% on the value above the NRB

Question 3

What is the current standard NRB?

Answer 3

£325,000 (subject to change and transferable NRB)

Question 4

What is the deadline for submitting the IHT account

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 of death, after which interest is charged

Question 6

When is the instalment option available?

Answer 6

For certain assets:
- Land
- Controlling shareholdings
- Business interests
- Farms or timber

Question 7

What is the instalment structure?

Answer 7

• 10 annual instalments
• 1st instalment due by the 6-month deadline
• Interest charged on remaining balance

Question 8

When is an estate ‘excepted’?

Answer 8

• No IHT due
• Estate meets criteria for either a low value or exempt excepted estate

Question 9

What are the two types of excepted estates for UK-domiciled individuals?

Answer 9

• Low value excepted estate
• Exempt excepted estate

Question 10

What are the conditions for a low value excepted estate?

Answer 10

• Gross estate below NRB (including specified transfers and exemptions)
• No IHT due
• No claim for residence NRB

Question 11

What are the conditions for an exempt excepted estate?

Answer 11

• Gross estate ≤ £3 million
• No IHT due because of spouse or charity exemptions
• Net estate (after debts and exemptions) ≤ NRB
• No BPR or other reliefs are considered

Question 12

What conditions disqualify an estate from being excepted?

Answer 12

• Gift with reservation of benefit
• 1 trust or trust >£250k (unless to spouse)
• Foreign assets >£100k
• Specified transfers >£250k
• Claim for residence NRB

Question 13

What form is used for non-excepted estates?

Answer 13

IHT 400, which includes supplementary schedules for different asset types.

Question 14

Is an IHT400 required for an excepted estate?

Answer 14

No. PRs submit simplified information as part of the grant application.

Question 15

When is a corrective account (C4) required?

Answer 15

• Errors in the original IHT400
• New assets or liabilities discovered
• Changes to exemptions/reliefs
• Post-death variations affecting IHT

Question 16

What happens if the estate value increases or decreases?

Answer 16

• PRs must pay additional IHT with the C4.
• PRs may claim a refund of overpaid IHT.

Question 17

What is the main issue with paying IHT before a grant is issued?

Answer 17

PRs need to pay IHT to get the grant, but usually cannot access estate assets without the grant.

Question 18

What are the two solutions for funding IHT before the grant?

Answer 18

• Direct Payment Scheme (IHT423) – from the deceased’s account directly to HMRC
• Borrowing – from beneficiaries or banks