The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Lynne Gowers on 7th March 2018
When someone dies, there is a lot of paperwork to attend to. The list of jobs that needs to be done may include filing an inheritance tax return. There are various forms in the IHT stable – the form you need will depend on the value of the estate and whether any IHT is payable.
In many cases, a grant of representation will be required in order to access most of the assets in the deceased’s estate. This will generally be a grant of probate if the deceased has left a will or a grant of letters of administration where the deceased did not leave a will.
If a grant of representation is not required (for example, because the deceased’s estate is simple), it is not necessary to complete form IHT205.
Before a grant of representation can be made, it is necessary either to show that no IHT is due or pay any IHT that is due.
For the majority of estates, no IHT is due, and form IHT205 will only be required to provide brief details of the estate.
If there is tax to pay or the deceased’s estate does not meet certain conditions, a formal account of the estate (on form IHT400) is required.
Form IHT205 is used where the deceased was domiciled in the UK and there is no tax to pay because the gross value of the estate is less than or equal to:
• the excepted estate limit;
• twice the excepted estate limit where a transfer of the unused nil rate band of a spouse or civil partner who died before the deceased is claimed;
• £1 million and all or part of the estate passes to the deceased’s spouse or civil partner, a qualifying charity or other UK national body.
The gross value of the estate is the total value of all assets making up the deceased’s estate before any debts are taken off, plus certain gifts.
For 2017/18, the nil rate band is £325,000 and the residence nil rate band (RNRB) is £100,000.
IHT is a good starting point and working through IHT205 will indicate if form IHT400 is required if this is not clear from the outset.
Form IHT217 is used to claim the unused nil rate band of a spouse or civil partner who died before the deceased.
However, if part of the nil rate band was unused on the earlier death, such that the full amount is not available on the second death, forms IHT402 should be used instead (and form IHT400 completed instead of form IHT205).
A claim for the unused RNRB of a spouse or civil partner is made on form IHT436.
Form IHT400 is the full IHT account. This must be completed where there is IHT to pay or the deceased’s estate does not qualify as an excepted estate.
The account is quite meaty and comprises form IHT400 and several schedules.
Some forward planning is necessary because an Inheritance Tax Reference Number is needed before form IHT400 can be submitted to HMRC.
An application for a reference number is made on form IHT422. The application should be made at least three weeks before the planned submission date of IHT400 – so allow plenty of time.
Other IHT forms may be needed in certain situations, for example, when IHT is payable on a trust. Given the complexity of the area, consider taking legal and advice from your tax advisor regarding inheritance tax. The full list of forms is available on the Gov.uk website.
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