Inheritance tax – brief guide to completing forms

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So, you have established that you are entitled to act as a personal representative (PR) in relation to a deceased person’s estate and you have decided that you want to take on the role of PR.

If the deceased left a valid Will, you will be called an executor but if there is no Will or there is an invalid Will, you will be called an administrator, although the terms PR, executor and administrator are often mistakenly used interchangeably.

Step 1 – Grant of Representation

One of the next steps to take early in the administration of the estate is to establish whether or not a Grant of Representation will be required. A Grant of Representation is a Court-sealed certificate bearing the name of the PR(s) and it is the document that PR(s) use as evidence of their entitlement to act in the administration of the estate. Strictly speaking, a Probate is a Grant of Representation when there is a Will and a Grant of Letters of Administration is a Grant of Representation when there is no Will. However, the terms Grant of Representation, Probate and Letters of Administration are often mistakenly used interchangeably but most people refer to a Grant of Representation as a Probate and this is the term that I shall use throughout this article.

If you think you may need help applying for the Grant, please do get in touch with me – I can guide you through the process very cost effectively.

Step 2 – Inheritance Tax or not?

The next step will be to consider which HMRC Inheritance Tax forms will need to be completed in support of your probate application. It is important to note that such forms are part of the probate process even if no Inheritance Tax (IHT) is due.

Excepted Estates

Most estates are excepted estates and as such, they have no IHT to pay. If the estate is excepted, the relevant form will be the Return of Estate Information (IHT205). Strictly speaking, this is not an IHT account and is a much shorter and simpler form than the full IHT account (IHT400).

What qualifies as an excepted estate (for deaths after 1st September 2006)?

  • An estate with a gross value which is under the IHT threshold (currently £325,000 for tax year 14/15);
  • An exempt estate (an estate which, if greater in value than the IHT threshold, passes entirely to either a spouse/registered civil partner and/or charity and the gross value is not in excess of £1 million);
  • The deceased was domiciled outside of the UK and the gross value of their UK assets is less than £150,000.

In addition to the above and from 6th April 2010, an estate will also be an excepted estate if the two following conditions are satisfied:-

  • The gross value of the estate is less than twice the IHT threshold (currently £650,000 for tax year 14/15); and
  • 100% of the unused IHT threshold from a deceased spouse or registered civil partner can be transferred to the deceased (in which case supplemental form IHT217 will need to be completed in relation to the spouse or registered civil partner that died first).

However, be aware that, having satisfied the above conditions, there are some further technical questions within Forms IHT205 and IHT217, the answers to which may determine that completion of IHT400 (and its supplemental pages) is nevertheless required. If an estate does not qualify as an excepted estate under the above conditions then it will be necessary to complete IHT400 (and its supplemental pages).

Full Inheritance Tax (IHT) account (IHT400)

IHT400 will be required:-

  • If an estate does not qualify as an excepted estate;
  • If an estate qualifies as an excepted estate but does not satisfy the further questions in forms IHT205 and/or IHT217.

Please also note the following:–

  • If IHT is payable it will never be appropriate to complete Form IHT205 and/or Form IHT217 but;
  • IHT400 (and its supplemental pages) may need to be completed even though no IHT is due;
  • IHT400 is a much longer document than IHT205 and more detail is required to complete IHT400 as compared to IHT205;
  • In most cases, some supplemental pages to the IHT400 will also need to be completed. These supplemental pages expand on the information given in the body of the IHT400.

Possible supplemental forms needed

  • IHT401 – where details of where the deceased had their permanent home when they died need to be completed
  • IHT402 which deals with transfer of any unused IHT threshold from a deceased spouse or registered civil partner to the deceased (the equivalent to form IHT217when using form IHT205)
  • IHT403 – when the deceased had made gifts/transfers during their lifetime
  • IHT404 – to give details of assets that the deceased owned jointly with another person
  • IHT405 – to give details of land, houses, buildings etc. owned by the deceased
  • IHT406 – to give details of bank and building society accounts, NS&I investments and premium bonds held by the deceased
  • IHT407 – to give details of the deceased’s household and personal goods
  • IHT408 – to claim charity exemption if some or all of the deceased’s household and personal goods are donated to charity
  • IHT409 – to give details of pensions received by the deceased (other than the state pension)
  • IHT410 – to give details about the deceased’s life policies, annuities or investment bonds
  • IHT411 – to give details of the deceased’s listed stocks and shares
  • IHT412 – to give details of the deceased’s unlisted stocks and shares
  • IHT413 – when business relief is to be deducted
  • IHT414 – when agricultural relief is to be deducted
  • IHT415 – to give details of any inheritance or share in an estate to which the deceased was entitled (but had not received before they died)
  • IHT416 – to give details of any debts owing to the deceased as at the date of death
  • IHT417 – to give details of the deceased’s foreign assets
  • IHT418 – to give details of the deceased’s trusts interest
  • IHT419 – to give details of any loans, overdrafts etc. owed by the deceased

As can be seen from the above, matters can prove to be quite complicated. If you think you need assistance, I would be happy to advise and assist, so please do get in contact.

Summary

Most estates are excepted and will only require the completion of form IHT205 (and sometimes the supplemental form IHT217) i.e. one or two short forms.

When the conditions to qualify as an excepted estate are not satisfied then an IHT400 will be required and, depending on the nature of the estate in question, a number of supplemental pages will also need to be completed, as set out above.

Please also note:-

  • If an IHT205 or IHT205 and IHT217 is being submitted, these will need to be submitted to the Probate Registry to which the oath for PR(s) and any relevant exhibited documents are being sent.
  • An IHT400 (and any supplemental pages) must be sent to HMRC in Nottingham but before Probate can be obtained, a receipt must be obtained from HMRC (for sending to the Probate Registry). The receipt must either confirm that no IHT is payable in the estate or that an initial minimum payment of IHT has been made.

Contact our wills and trusts experts for advice on inheritance tax planning and other matters. Call us today on 03456 381381.

If you still haven’t finalised your last wishes or would like to write a new will, want to leave money in trust for a young relative, or are struggling with probate issues, call us on 03456 381381. Alternatively, email us at estatemanagement@ibblaw.co.uk.