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Where Taxpayers and Advisers Meet

Pension - death within 2 years

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Pension - death within 2 years

Postby Brightonian » Tue Sep 27, 2016 10:23 am

I am trying to help a client's widow. Her husband died, leaving everything to her. There is a will. The gross estate is probably just less than £1m. But he was terminally ill for some time and, within two years of death, transferred two final salary schemes into a personal pension in order to improve the death benefit. He then took the money under the ill health rules. I feel that this will have to be disclosed to HMRC so do I need to complete the IHT400 instead of the short form IHT205? Presumably probate is also necessary?
There is one practical point also. As the who;e estate has been left to the widow, there is no IHT to pay, other than possibly on pension benefits. There is no way that I can compute this liability. A colleague tells me that there may be a discount applicable. Do I send the return in showing no tax payable? Does this leave the widow open to penalties if I do? I assume there will be interest but that is fine. Has anyone any experience of this situation?

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: Pension - death within 2 years

Postby LozaACCS » Tue Sep 27, 2016 8:16 pm

I believe form IH400 should be completed because of the pension, specifically Sch IHT 409.
Where property is held jointly by a married couple a tenanted deduction is not available.
Since the pension fund at death is held under a defined contribution scheme, the quantum of the fund should not be difficult to ascertain, the IHT implications of the transfers are more complex.

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: Pension - death within 2 years

Postby Brightonian » Wed Sep 28, 2016 9:04 am

Thank you for your help.


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