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Where Taxpayers and Advisers Meet

Is IHT main residency band applicable before 2017

Robbi
Posts:9
Joined:Sun Nov 03, 2019 6:48 pm
Is IHT main residency band applicable before 2017

Postby Robbi » Sun Nov 03, 2019 10:35 pm

Hope you can help please.
My father got cancer in 2013 and put everything (house, shares and a car) in my mother's name as he thought she would outlive him and wanted to make things simpler in the event of his death.
My mother died the following year in August 2014. My father survived my mother and died in September 2019. I have since discovered that my mother, for reasons I don't know yet, used up £178,000 of her IHT allowance (325,000) so she has £147,000 to transfer to my father. My father now has 325,000 of his own allowance plus 150,000 as a main residence allowance totalling £475,000. So now my father has died, I gather from speaking to HMRC that all unused allowances (from my mother) are transferred and IHT is calculated on the second death of a married couple.
My calculations are based on my father's allowance of £325,000 nil rate band, £150,000 main residency and £147,000 from my mother totalling £622,000 .

As I understand, a married couple can double their allowance. My question is: as my mother died in August 2014, the main residence allowance was only introduced by George Osborne in 2017, would she still be entitled to the £150,000 and therefore increasing his allowance to £772,000?

HMRC said on 2 separate occasions with 2 different advisors that if you submit the IHT435 and IHT437 forms then "hopefully" the allowance will be allowed as, irrespective of my mother dying before the date it was introduced, the allowances are all calculated on the second death.

Does anyone know for sure what the case is.

My father's house is for sale at £750,000. His shares to the value of £70000 were transferred to me and my sister 7 months prior to his death.
If my mother's main residency allowance isn't taken account, we will be left with a IHT bill of about £80,000. If it's allowed we won't pay any tax.
What is more likely ?

Thank you in advance .

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Is IHT main residency band applicable before 2017

Postby jerome.lane » Mon Nov 04, 2019 11:17 am

Any unused RNRB can be transferred between spouses or civil partners regardless of when the first death occurred and whether or not the first deceased held a qualifying residential interest. The only factor that limits this is whether the first deceased’s estate was valued at over £2 million. The transferable RNRB must be claimed by the personal representatives within two years from the end of the month in which the second death occurs, so there's plenty of time to get this straight. If you need any assistance with dealing with the estate, we are licensed to provide probate services.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

Robbi
Posts:9
Joined:Sun Nov 03, 2019 6:48 pm

Re: Is IHT main residency band applicable before 2017

Postby Robbi » Mon Nov 04, 2019 11:19 am

Thank you very much for the info .

Robbi
Posts:9
Joined:Sun Nov 03, 2019 6:48 pm

Re: Is IHT main residency band applicable before 2017

Postby Robbi » Fri Nov 22, 2019 11:29 am

Hi again, it has come to light that as a result of me requesting a copy of my late mothers probate from 2014, (my father put his entire estate in my mothers name as he thought he was going to die first) my mother then transferred everything back to my father as per her Will totalling approx £178,000 (bank accounts and shares) which left only £147,000 left of her allowance of £325,000.

My father in his infinite wisdom thought that it would be the simplest way to help my mother if he died first.

I do not understand why my late mother had to use up part of her allowance to transfer her estate back to my father, as at the end of the day they were married.
I understand that you can query probate up to 2 years after the event but this is now over 5 years ago.

My question is " did my mother have to use up part of her allowance to pass back her estate which was jointly owned anyway as they were married.

Any information on this would be hugely appreciated.

Thank you.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Is IHT main residency band applicable before 2017

Postby maths » Fri Nov 22, 2019 3:34 pm

Inter-spouse transfers (assuming in principle both spouses UK domiciled) are exempt transfers for IHT ie they are outside the. scope of IHT.

Thus, I do not understand why part of the NRB on the inter-spouse transfers could have been used.

However, if in 7 years prior to death large lifetime non-spouse transfers were made these would eat into the deceased's NRB.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Is IHT main residency band applicable before 2017

Postby AGoodman » Fri Nov 22, 2019 3:50 pm

As maths says, transfers between your parents (in life and death) would have been exempt for IHT so would not use up any allowances.

Are you saying that somebody submitted an IHT account to this effect?

If so, can you ask them why? If it was your father and he made a mistake, you could probably still seek a transfer of your mothers full NRB and RNRB.

Robbi
Posts:9
Joined:Sun Nov 03, 2019 6:48 pm

Re: Is IHT main residency band applicable before 2017

Postby Robbi » Fri Nov 22, 2019 7:18 pm

Prior to my mothers death, my father put his entire estate ie shares to the value of £ 120000 and bank accounts to the value of £60000 into my mothers name as he had cancer and thought he would die first but my mother died first and her Will stated that everything was left to my father. so all transfers were dealt with between spouces. i dont think that any of my mothers allowance should have been used up as they were husband and wife. i think that the solicitors used back in 2014 for my mothers probate were wrong. i dont know whether it can be sorted after so much time has passed.i have notified my solicitor dealing with my fathers probate of my conserns as it could be a matter of paying around £80,000 IHT or nothing at all. Its freightening to think solicitors could get it wrong ... or maybe my thoughts are unfounded. i sincerely hope not but i am no expert . sorry if i have repeated myself just very angry and upset with situation.


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