Tax Flashcards
What two duties does PR have under s.216 IHTA 1984
(1) Deliver an account to HMRC regarding the deceased’s estate
(2) Pay any IHT due in respect of the succession estate
What should the IHT account specify? what does it form the basis of?
PRs should deliver an account to HMRC specifying:
- all of the property comprising the deceased’s taxable estate immediately before death and the value of each item at the date of death (in essence a list of assets and liabilities)
- the exemptions and reliefs that apply.
The account provides the basis upon which the amount of IHT due (or not) is calculated and the form is submitted to HMRC along with payment for any IHT due.
What should the IHT account specify? what does it form the basis of?
PRs should deliver an account to HMRC specifying:
- all of the property comprising the deceased’s taxable estate immediately before death and the value of each item at the date of death (in essence a list of assets and liabilities)
- the exemptions and reliefs that apply.
The account provides the basis upon which the amount of IHT due (or not) is calculated and the form is submitted to HMRC along with payment for any IHT due.
What are the deadlines for submitting accounts and for paying the IHT due
Submitting account:
12 months from the end of the month in which the death occurred
IHT: 6 months from the end of the month in which death occurred, after which interest becomes payable on the unpaid tax
What items can tax instalment be used for?
- 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 hardship
- Farms or interest in a farming business
- Business or interest in a business
- Timber
How does tax instalments work?
When does it cease?
- The IHT due in respect of certain assets may be paid by 10 equal annual instalments:
- The first instalment is due by the usual deadline (i.e., six months after the end of the month in which the deceased died).
- The remaining instalments are due on each subsequent anniversary date, with interest charged on any IHT that remains outstanding after the initial deadline date.
- To avoid interest costs, instalment option is usually only used where required (and only for as long as it is needed). This is most commonly where there are insufficient liquid assets available to pay IHT and the PRs wish to e.g., avoid a sale of the family home simply to raise funds to pay tax
- If any property to which instalment option applies is subsequently sold, the instalment option ceases in relation to that property. The outstanding IHT on that property is due immediately and the sale proceeds are available to meet this liability
What is a Low value excepted estate
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.
* The taxable estate figure plus the value of ‘specified transfers’.
* Specified transfers are chargeable transfers made in the 7 years before death comprising cash, chattels, shares or land.
* The current NRB amount (or, double this if a claim for a full transferrable NRB).
* The residence NRB is not considered.
What is an exempt excepted estate?
What exemptions are permissible?
An exempt excepted 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.
The meaning of gross value and NRB are the same as for the low value excepted estate.
Only spouse or charity exemption can be considered for these purposes – no other reliefs can be taken into account.
What also needs to be satisfied for a low value excepted estated/ exempt excepted estate
- No gift with reservation of benefit
- Foreign assets can’t exceed more then £100k
- only one trust which is not valued more then 250k
- no claim for residential nile rate band is made
How does tax instalments work?
When does it cease?
- The IHT due in respect of certain assets may be paid by 10 equal annual instalments:
- The first instalment is due by the usual deadline (i.e., six months after the end of the month in which the deceased died).
- The remaining instalments are due on each subsequent anniversary date, with interest charged on any IHT that remains outstanding after the initial deadline date.
- To avoid interest costs, instalment option is usually only used where required (and only for as long as it is needed). This is most commonly where there are insufficient liquid assets available to pay IHT and the PRs wish to e.g., avoid a sale of the family home simply to raise funds to pay tax
- If any property to which instalment option applies is subsequently sold, the instalment option ceases in relation to that property. The outstanding IHT on that property is due immediately and the sale proceeds are available to meet this liability
What items can tax instalment be used for?
- 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 hardship
- Farms or interest in a farming business
- Business or interest in a business
- Timber
What are the deadlines for submitting accounts and for paying the IHT due
Submitting account:
12 months from the end of the month in which the death occurred
IHT: 6 months from the end of the month in which death occurred, after which interest becomes payable on the unpaid tax
What forms are used for non- excepted estates?
what is their purpose?
IHT400 and IHT 421 should accompany
The IHT 400 is a long form and is supplemented by additional forms called schedules (IHT401 - IHT 420) which contain detailed information about each of the assets. Which schedules should be completed will depend on the assets held by the deceased.
An IHT 421 (the probate summary) should also be completed. It contains details about the deceased and a summary of the gross/ net succession estate (assets passing under the grant rather than the IHT estate).
what form is used for excepted estate?
IHT205
What form is used if too much/ too little IHT is paid, and what must it state?
Account Form C4:
- Additional assets/ liabilities that changed after IHT 400
- Corrections to value of IHT
- Changes to exemptions/ reliefs applied
- Variation of the original beneficiary entitlements which effect IHT
If IHT owed- pay
If IHT overpaid- claim a refund
