Fillable Inheritance Tax Toolkit: IHT400 (2019 To 2020) (Cabinet Office)

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Inheritance Tax Toolkit: IHT400 (2019 To 2020) (Cabinet Office)

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Inheritance Tax Toolkit
Effective for deaths occurring from 6 April 2019 - Inheritance Tax Account Form
IHT400
Published June 2019
Effective from 6 April 2019
2
Index
Introduction .................................................................................................................................. 3
Areas of risk for Inheritance Tax .................................................................................................. 3
Using links within this document .................................................................................................. 4
Checklist for Inheritance Tax ........................................................................................................ 6
Explanation and mitigation of risks ............................................................................................. 10
Effective from 6 April 2019
3
Introduction
Tax agents and advisers play an important role in helping their clients to get their tax returns
correct. As a specialised tax area, many agents do not complete a large number of Inheritance
Tax Accounts. This toolkit is aimed primarily at helping and supporting tax agents and advisers
for whom Inheritance Tax Accounts do not make up a significant element of their work. Other
agents may still find the toolkit helpful in validating their approach to this work and it may also
be of use to anyone, including trustees and personal representatives, in completing form
IHT400 Inheritance Tax Account.
The toolkit may also be helpful when completing the excepted estate forms IHT205 or C5 (for
Scotland) as many of the considerations, such as valuation, also apply to these.
This version of the toolkit was published in June 2019. The risks in this toolkit have been
reviewed and updated where necessary and are relevant for all deaths occurring on or after 6
April 2019. Whilst this toolkit may assist in the completion of form IHT400 for earlier deaths, you
will need to consider the relevant legislation as it applied at that time. Its use is entirely
voluntary.
The content of this toolkit is based on our view of how tax law should be applied. Its application
to specific cases will depend on the law at the relevant time and on the precise facts.
For further information on using this toolkit and reasonable care under our penalty system see
Tax agents toolkits.
For guidance on matters not dealt with in this toolkit you should refer to our other guidance - see
Inheritance Tax.
Areas of risk for Inheritance Tax
This toolkit is intended to cover risks seen on the majority of forms IHT400 received. Risks
arising in connection with claims to Business Property Relief or Agricultural Property Relief and
reliefs associated with works of art and other National Heritage Assets are specifically not dealt
with in this toolkit. Although these are substantial issues they are not involved in the majority of
forms IHT400 completed and received.
Inheritance Tax is different from other taxes in that it does not have a year of assessment - it is
a tax triggered by events such as a person’s death. When completing form IHT400 the personal
representatives are providing details of somebody else’s assets and liabilities and they will need
to look back over a person’s lifetime to establish certain events for the potential effect on the
Inheritance Tax liability. This means that the range and depth of information gathering required
can be substantially wider than in other tax regimes. It is for this reason that the ‘fact find’ is
important and involves obtaining information from a variety of sources.
The main areas of risk for completing form IHT400 fall broadly into four categories:
Omissions
It is common for assets or gifts to be omitted from form IHT400. It is important, subject to
proportionality, to look beyond the information provided and check the basic details. People
outside the professional agent community often do not recognise items that need to be included
in form IHT400. A good example is that some people do not realise the deceased’s interests in
jointly held property form part of the estate for Inheritance Tax purposes, even though their
share of that property may pass directly to other joint owners on death. Another example is the
need to identify gifts made by the deceased or less obvious assets such as interests in trusts. It
is therefore important to ask the right questions, not simply 'what assets did the deceased
have?'
Effective from 6 April 2019
4
Valuations
Valuations are the biggest single area of risk, accounting for a large part of our compliance
checks. It is important to properly ascertain the value of assets. For assets with a material value
you are strongly advised to instruct a qualified independent valuer, to make sure the valuation is
made for the purposes of the relevant legislation, and for houses, land and buildings, it meets
Royal Institution of Chartered Surveyors (RICS) or equivalent standards.
Some issues are easily overlooked when instructions are given. For example, the potential for
the development of the land, the existence of tenancies or occupancy by people other than the
deceased. Copies of relevant agreements, or full details where only an oral agreement exists,
are often not given to the valuer so misunderstandings arise. Where we are satisfied that all the
relevant information has been considered by the valuer, we are less likely to challenge the
valuation.
Applying the correct legislation, rules and practices
Every year we receive form IHT400 in estates where it is clear that the information submitted
does not meet current requirements. Keeping up-to-date with legislative changes is not easy,
and searching through guidance is time consuming. We appreciate that applying the rules
correctly can be difficult, particularly where they are complex or unfamiliar. However, it is
important that rules are being applied as they should be.
Record keeping
Good record keeping is essential. The absence of records can mean that information provided
to you is not accurate and these mistakes are in turn passed on to us. Events may have
occurred in the past yet still affect the Inheritance Tax payable. We appreciate that when
completing form IHT400 it is the deceased’s records which you are required to obtain and rely
on. We would therefore suggest that you advise your clients about the importance of lifetime
records when they visit you for other issues, for example, to have a will drafted.
The type of records which it would be helpful for your clients to retain include, for example:
Gifts made. Although it is generally gifts within seven years of the date of death which are
important, it is advisable for your clients to keep records at all times
Circumstances that affect the amount of nil rate band available for transfer to the surviving
spouse or civil partner.
Keeping careful and detailed notes and valuations of lifetime transfers and having access to
detailed histories of assets makes it easier for personal representatives and their agents to
gather the relevant information to complete form IHT400 correctly and in full.
Using links within this document
Blue underlined text are links within this document.
Green bold text are hyperlinks to external documents on the internet (access to the internet is
necessary to view these).
We have a range of services for people with disabilities, including guidance in Braille, audio and
large print. Most of our forms are also available in large print. Please contact any of our
helplines if you need these services.
Dealing with HMRC if you have additional needs
Effective from 6 April 2019
5
Giving HMRC feedback on toolkits
HMRC would like to hear about your experience of using the toolkits to help develop and
prioritise future changes and improvements. HMRC is also interested in your views of any
recent interactions you may have had with the department.
Send HMRC your feedback
Effective from 6 April 2019
6
Client Name
:
Period Ended:
Checklist for Inheritance Tax
Information gathering
Yes
No
1
Has consideration been given to the rules for excepted
estates?
Has sufficient time been given to research and prepare
form IHT400?
Have the will and associated documents been obtained
and reviewed and have copies been enclosed with the
form IHT400?
Has the deceased’s paperwork relating to assets and
liabilities been checked, including any overseas assets or
assets held in trust?
Have close family and past or present business and
personal associates been consulted and have they
understood the terminology used?
Have any disputes or court actions which may affect the
estate been identified?
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Effective from 6 April 2019
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Information gathering continued
Has the deceased disposed of property on their death that
qualifies their estate for the residence nil-rate allowance
(RNRA) that came into effect on 6th April 2017?
Has it been identified whether the deceased had a spouse
or civil partner who died before them and if so, have their
details been obtained?
Has the domicile of the deceased and surviving spouse or
civil partner been established?
Assets
Have all items referred to in the will (or in any other
relevant document) been included in form IHT400?
Have all assets that the deceased held jointly on their
death been identified?
Have all assets been identified that are either due to the
deceased from someone else’s estate, which have not yet
been received, OR that have been received by the
deceased from someone else’s estate in the last five
years?
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Effective from 6 April 2019
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Gifts and debts
Have all gifts or other transfers of value made within the
seven years of the date of death been identified?
Have any gifts with reservation of benefit been fully
considered and identified?
Value and calculation
Has evidence been gathered to substantiate claims for
debts owed by the deceased?
Pensions, life insurance and trusts
Have all pension scheme lump sum death benefits been
included on form IHT409?
Have the deceased's pension arrangements been
checked to establish whether there have been any
transfers, disposals, contributions or other changes in the
two years before death?
Has the correct valuation of any life policy included in the
estate been checked?
Have the terms and ownership of any joint life policies
been checked?
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Effective from 6 April 2019
9
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Pensions, life insurance and trusts continued
Has it been established whether the deceased had any
interest in a trust set up by someone else?
Valuations
Has the open market valuation at the relevant date(s)
been obtained and used (for example the date of death or
date of gift) for each asset?
Have the valuations of any trust assets been obtained
from the trustees and do they include details of any
apportioned or accrued income yet to be paid?
General
Has the form IHT400 and all accompanying schedules
been checked for completeness and accuracy?
Is the Inheritance Tax calculation accurate?
Has the Inheritance Tax payment that is due been paid?
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Effective from 6 April 2019
10
Explanation and mitigation of risks
Information gathering
1. Has consideration been given to the rules for excepted estates?
Risk
We receive many unnecessarily completed forms IHT400 where an IHT205 (C5 for Scotland) or
an IHT205 or C5 with an IHT217 would suffice. We also receive many excepted estate forms
when an IHT400 should have been completed. Completing the wrong form can cause
considerable extra work for personal representatives, agents, bereaved relatives and HMRC
and can also lead to unnecessary delays in finalising and dispersing estates.
Mitigation
Check the guidance to see whether the estate is within one of the three categories of excepted
estates and within the limits of what qualifies as an excepted estate. See Inheritance Tax
Manual (IHTM) IHTM06011.
If appropriate complete an IHT205 or C5 attaching an IHT217 if necessary.
Consider whether a full form IHT400 needs to be submitted even if there is no Inheritance Tax
to pay.
Explanation
New legislation was introduced in 2010 which expands the definition of excepted estates for
deaths on or after 6 April 2010 and so increases the circumstances in which an IHT205 (C5 for
Scotland) can be completed. It also introduced a new form IHT217 to claim a transfer of unused
nil rate band in excepted estates.
For further guidance on the rules from 6 April 2010 see IHTM06024.
A further amendment was made with effect from 1 April 2014 altering the rules dealing with
deducting liabilities in connection with exempt excepted estates in certain circumstances.
For guidance as to what qualifies as an exempt excepted estate see IHTM06013.
For guidance on the changes to the exempt excepted estates rules from 1 April 2014 see
IHTM06028.
Whether an estate is an excepted estate is not solely dependent on whether the estate is tax
paying or not.
For further information see Valuing the estate of someone who's died.
This toolkit may also be helpful when completing the excepted estates forms IHT205 or C5 as
many of the considerations, such as valuation, also apply to these.
back to checklist
2. Has sufficient time been given to research and prepare form IHT400?
Risk
We recognise that personal representatives want to obtain probate quickly, and dealing with an
estate can be complicated and time consuming. However, not allowing sufficient time to speak
with the relevant people and gather all the necessary information can lead to errors and
omissions and the use of unrealistic estimates when completing the return.
There is a risk that the tax payable date (six months from the end of the month in which the
death occurred) is mistaken with the form IHT400 submission date (12 months from the end of
the month in which the death occurred).
Effective from 6 April 2019
11
Mitigation
To enable you to gather all the necessary information and valuations and to submit as complete
a form IHT400 as possible, use as much of the allowable time for submission of the form as
necessary. If there is still a problem and, for example, you are unable to get exact values, you
can enter a reasonable estimate of value. But you must tell us which figures are estimates. Tell
us how you have arrived at the values and why you had to use them, preferably on pages 15-16
in form IHT400, or in a covering letter or note. You should only use estimates on form IHT400 if
you have no other option.
To mitigate interest charges, it is possible to make a payment on account if Inheritance Tax is
due on the estate. However, this does not absolve you of the requirement to submit a form
IHT400 on time.
To make a deposit or payment on account of Inheritance Tax you will require a reference
number. You must apply for a reference number at least three weeks before the date you
expect to make payment. Only apply for a reference if you are absolutely certain that
Inheritance Tax is due.
If there are problems with the completion of the account, let us know. It may be that a special
type of grant will solve the immediate problem, but you will need to talk to your Probate Registry
initially about it.
Explanation
We receive a lot of forms IHT400 that are not correctly or fully completed but have been
submitted either to avoid interest charges or due to the pressure to obtain probate.
If you or your clients want to avoid penalties for late submission, the deadline for submitting a
form IHT400 is 12 months from the end of the month in which the death of the deceased
occurred. The date of submission of form IHT400 is often confused with the date interest starts
to run (six months from the end of the month in which death occurred) on any unpaid
Inheritance Tax. This results in large numbers of incomplete or incorrect forms being submitted
within six months of the date of death.
Reference numbers can be applied for online on the HMRC website if the deceased had a
National Insurance number. If they did not, then form IHT422 Application for an Inheritance
Tax reference needs to be completed. This can be downloaded from the HMRC website.
For further guidance on when a penalty may arise for an account delivered after the deadline
see IHTM36021+, and for an account where tax has been under declared because reasonable
care has not been taken to get it right see CH80000+.
For further information see Pay your Inheritance Tax bill.
back to checklist
3. Have the will and associated documents been obtained and reviewed and have
copies been enclosed with form IHT400?
Risk
Failure to review and provide copies of the will and other essential information with form IHT400
is a common mistake and results in unnecessary delays. In particular there is often a failure to
review and provide details about beneficiaries when this affects the Inheritance Tax position of
the estate, such as where money is left to charity or to any other exempt beneficiary. Enquiries
may be raised if we do not receive copies of any wills, codicils, deeds of variation or other
relevant documentation.
Effective from 6 April 2019
12
Mitigation
Make sure you have thoroughly checked the essential documents, for example the will,
including any foreign wills, any codicil(s), disclaimers, appointments, deed(s) of variation or
deed(s) of family arrangement. In particular check if:
all beneficiaries are still alive
the number of beneficiaries has been stated - the will may just state, for example, '£5,000 to
each of my grandchildren'. In this example you would need to establish the number of
grandchildren
the deceased bequeathed specific gifts as these may lead to 'grossing up' or 'interaction' - see
Q24
the deceased left anything to charity or to any other exempt beneficiary.
Ensure that you provide us with legible copies of the will, and any codicil(s) or other essential
documents.
Explanation
Time spent gathering information at the outset can reduce unnecessary contact with us. We
often have to raise enquiries for information or documentation.
If a beneficiary to the estate has died before the deceased, we need to know as this may have
an effect on the chargeable estate. For example, if the deceased’s spouse died before them
spouse relief will not be available.
If the will leaves any money or property to a charity or another exempt beneficiary then this will
normally be exempt from Inheritance Tax. If you do not take this into account on the IHT400 you
may end up paying too much Inheritance Tax and there may be unnecessary delays if any
overpaid tax needs to be repaid to you.
For further information about exempt transfers see IHTM11012.
back to checklist
4. Has the deceased’s paperwork relating to assets and liabilities been checked,
including any overseas assets or assets held in trust?
Risk
The value of the deceased’s estate may not be correctly returned and assessed if you have not
checked all the available paperwork.
Mitigation
Check the deceased’s paperwork including, for example, recent tax returns and also check for
any papers held in a safety deposit box.
Clear up any anomalies or discrepancies before completing form IHT400. If after exhausting all
possibilities you are unable to resolve an issue you should include an explanation in the
'additional information' section on pages 15-16 of form IHT400 or in a covering letter, for
example, if there is a safety deposit box where access cannot be obtained until after probate.
Take into account any asset in which the deceased had, or may have had, a beneficial interest
at the date of death.
With foreign assets you will need to consider the position under local law, Double Taxation
Relief or Double Taxation Conventions when preparing form IHT400.
Explanation
HMRC has to reconcile any inconsistencies, omissions and anomalies in the estate. Tax returns
will provide information about any of the deceased’s assets that were chargeable to Income
Effective from 6 April 2019
13
Tax. Safety deposit boxes often contain valuable information regarding assets, for example,
share certificates and gilts. Insurance policies may also provide a list of other valuable assets
not mentioned elsewhere.
Foreign assets are commonly overlooked resulting in the estate being undervalued. Ownership
of overseas assets (in particular holiday homes, related household goods and bank accounts)
has increased substantially over the last 20 years as people live and/or work abroad and travel
more.
back to checklist
5. Have close family and past or present business and personal associates been
consulted and have they understood the terminology used?
Risk
Information relevant to the estate may be missed. Words and phrases that are commonly used
by HMRC and agents may not be understood or may be misinterpreted by clients and others.
Misunderstandings can arise and opportunities to gain information and clarification can be
missed. In particular, gifts and assets may remain overlooked and undisclosed.
Mitigation
It is important for you to obtain details from those who have knowledge of the deceased’s
affairs, especially family members and anyone with a power of attorney. Solicitors, accountants,
financial advisers and business associates should also be approached.
It is easy to assume that your clients understand what details are required because they do not
question a statement, or ask for clarification. Try to avoid ambiguity and misunderstanding by
explaining the requirements and processes of Inheritance Tax and probate in terms and
language that the personal representatives and other non-practitioners understand.
Examples of commonly misunderstood phrases:
'Joint property' - often interpreted as referring only to houses, land and buildings. The meaning
is far wider and also includes things such as syndicates sharing race horses, jewellery, bank
and building society accounts.
'Beneficial interest' - is often a phrase that lay people do not understand and do not appreciate
that it can include assets which are held or registered in another person’s name.
Explanation
You and your clients may not easily be able to locate all the deceased’s papers and documents
which are often lost, forgotten or destroyed. Information, assets and details of gifts frequently
come to light after form IHT400 has been submitted. We are aware that people keep details of
their finances private or their personal and business information separate. This is why it is
important to consult with anyone who may have knowledge of the deceased’s affairs. More
information about gifts can be found at Q13.
back to checklist
6. Have any disputes or court actions which may affect the estate been identified?
Risk
Court actions, family disputes or any type of challenge to the estate can make a significant
difference to its value.
Mitigation
If you are aware of a court action, claim, dispute, or potential dispute, let us know what the
circumstances are, who is involved and, if possible, details of the timescale. It could be that
Effective from 6 April 2019
14
there was a court action in existence before the death of the deceased. If you become aware of
anything unusual which you suspect may impact on the value of the estate, keep us informed.
Explanation
There are many reasons why disputes arise, they may include:
a lack of clarity in the drafting of the will
a perceived injustice
the deceased was pursuing an outstanding debt
a claim for damages
a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
For further guidance see IHTM35000+.
In some of these situations family dynamics can be very complex and difficult with parties
reluctant to reveal or release details. Any information we receive is treated in strictest
confidence. Early notification of ongoing disputes or court action may mean we can take action
to limit further delay. For example, we may ask the District Valuer to inspect informally any
houses, land or buildings in order to obtain a valuation while waiting for the outcome of any
dispute or court action.
back to checklist
7. Has the deceased disposed of property on their death that qualifies their estate
for the residence nil-rate allowance (RNRA) that came into effect on 6th April
2017?
Risk
An incorrect claim for RNRA is made where the conditions for its availability have not been
satisfied, or where they have, the RNRA has been incorrectly applied.
Mitigation
Refer to the guidance at IHTM46000+ and the RNRA calculator.
Explanation
Careful consideration should be given to available guidance if you consider the estate qualifies
for RNRA.
Basic overview:
Broadly, a residence nil-rate amount (RNRA) is available, for deaths on or after 6
th
April 2017, if
a person’s estate includes a home which is their residence (IHTM46031), and this is left to their
direct descendants. A direct descendant means a lineal descendant of the deceased such as
their child, grandchild, great grandchild etc., but the legislation has extended the scope to
include others (IHTM46034). Details of the RNRA being claimed can be provided on form
IHT435.
If the deceased qualifies for RNRA, their estate may also be entitled to any unused RNRA from
the earlier death of their spouse or civil partner (IHTM46040). This is called the ‘brought-forward
allowance’.
The legislation also provides for an adjustment to the RNRA in situations where a person has
downsized or disposed of their residence after 8th July 2015, and on their death they leave a
less valuable residence or other property to their direct descendant (IHTM46050+). The
adjustment is called a ‘downsizing addition’.
A claim for brought-forward allowance, or the downsizing addition, must be made by the
deceased’s personal representatives within 24 months, starting from the end of the month in
Effective from 6 April 2019
15
which the deceased died. There is no prescribed form for making a claim, but form IHT436 can
be used to claim the brought-forward allowance, and IHT435 for the downsizing addition.
In calculating the IHT due, any available RNRA is applied to the value of the estate in priority to
the nil-rate band, and does not apply to lifetime transfers made within 7 years of the death
(IHTM46003).
back to checklist
8. Has it been identified whether the deceased had a spouse or civil partner who
died before them and if so, have their details been obtained?
Risk
If full details of any pre-deceased spouse or civil partner have not been obtained the
transferable nil rate band may be overlooked or not applied correctly resulting in too much or
too little Inheritance Tax being paid.
Mitigation
Thoroughly research the background of any pre-deceased spouse or civil partner. Is there the
possibility that the deceased was widowed more than once? Avoid making assumptions about
what happened to the pre-deceasing spouse or civil partner’s estate and obtain the
documentation. If you believe relief is due but you cannot establish all the facts after extensive
research then tell us what efforts you have made and what you have discovered. Provide full
details of the information you have obtained either in a covering letter or on pages 15 and 16 of
form IHT400. Don’t forget to include copies of any documentation you have together with the
completed form IHT402 and we will consider the claim.
Explanation
This relief has to be claimed (see IHTM43006+) using form IHT402 Claim to transfer unused
nil rate band. The notes on pages one and four of form IHT402 will help you. There is a time
limit for this claim which is 24 months, starting from the end of the month in which the deceased
died.
Common points often overlooked:
If Estate Duty, Capital Transfer Tax or Inheritance Tax was paid on the first death, you cannot
claim this relief as the nil rate band will have been used
Ensure you are using the correct threshold to calculate the percentage of the transferable nil
rate band available.
For further information see Transferring Inheritance Tax thresholds.
For further information on nil rate bands (thresholds) see Inheritance Tax thresholds.
If the deceased had more than one pre-deceased spouse or civil partner, you can only claim
to a total of 100 per cent of the nil rate band. Complete a separate form IHT402 for each
spouse or civil partner
Reading all the documentation of the pre-deceased spouse or civil partner very carefully is
imperative, particularly the will. You can then identify all chargeable legacies, any indication of
lifetime activity, or anything else, such as having the power of appointment over trust funds,
which will reduce the unused nil rate band. Lifetime transfers and deeds of variation must not
be overlooked
Where the pre-deceasing spouse or civil partner died intestate, make sure that you consider
the destination of their estate under the intestacy rules as they stood at that time. You will
also need to consider the domicile of the pre-deceased spouse or civil partner as the rules
vary dependent upon the country.
For further guidance see IHTM12000.
Effective from 6 April 2019
16
Consideration will need to be given to the domicile of the pre-deceased spouse or civil partner
as well as the deceased as at the date of the first death as this could affect the amount of the
spouse or civil partner exemption that was then available.
For further guidance see IHTM11033.
Check that the spouses were legally married or that the civil partnership was registered at the
date of the first death.
For UK civil partnerships the first death must have occurred on or after 5 December 2005, the
date the Civil Partnership Act (CPA) became law.
For further information on equivalent overseas relationships see Schedule 20 CPA 2004. Prior
to 22 March 1972 there was no spouse exemption and so the entire estate would be taxable
even if it passed to the surviving spouse.
Between 22 March 1972 and 12 November 1974 the spouse exemption was limited to £15,000.
This limitation applied to both absolute and life-interests.
On considering a grant issued when Estate Duty was applicable, you need to look at the details
contained on the grant carefully. If the grant shows duty as being paid then there is no nil rate
band available to transfer. Even if the amounts shown on the grant are under the threshold, the
value of the assets subject to Estate Duty may be substantially more.
If Estate Duty is not shown as payable on the grant, you still need to consider whether there
were any assets not passing under the grant which need to be included in your calculation.
If the pre-deceased spouse was a member of the armed forces and died prior to 12 March
1952, you need to check which of the two schemes for providing relief from Estate Duty applies.
For further information see Transferring Inheritance Tax thresholds.
For further guidance on the transferable nil rate band see IHTM43000+.
For further information on nil rate bands (thresholds) see Inheritance Tax thresholds.
back to checklist
9. Has the domicile of the deceased and surviving spouse or civil partner been
established?
Risk
The term domicile is often misunderstood and is frequently confused with nationality or
residence. Spouse/civil partner relief is limited if the deceased is domiciled in the UK but the
spouse or civil partner is not.
Mitigation
If there is any uncertainty about the deceased’s domicile find out as much information as
possible about the life of the deceased from birth to death. If it is claimed that the deceased was
not domiciled in the UK complete form IHT401 Domicile outside the United Kingdom as fully
as possible providing all supporting evidence you have collected. Explain how the estate is to
be distributed if the deceased is non-UK domiciled and did not leave a will.
If there is any uncertainty about the domicile of the surviving spouse or civil partner, find out as
much information as you can and provide supporting evidence as their domicile can also have
an effect on the availability of reliefs.
For further guidance see IHTM11031 and IHTM11033.
Explanation
The law of 'domicile' is of fundamental importance in the determination and application of
Inheritance Tax and has a major impact on available relief or exemptions with the surviving
Effective from 6 April 2019
17
spouse or civil partner particularly affected. Increased global mobility has meant establishing
domicile status for Inheritance Tax purposes has become more difficult.
For further guidance see IHTM13001 and IHTM13021+.
The deceased may still be deemed UK domiciled for Inheritance Tax purposes even if they
have a foreign domicile ruling from HMRC for Income and Capital Gains Tax purposes during
their lifetime.
For further guidance see IHTM13024.
The Channel Islands and the Isle of Man are considered outside the UK for Inheritance Tax
purposes.
If the deceased is UK domiciled then their worldwide assets are chargeable to Inheritance Tax.
Where the deceased was domiciled in the UK but their spouse or civil partner is not then, for
deaths before 6 April 2013 the relief is limited to £55,000. Where the deceased died on or after
6 April 2013 the relief is limited to the Inheritance Tax nil-rate band (threshold) that applies at
the date of death - currently £325,000. Where the deceased died on or after 17 July 2013 it is
possible for the surviving spouse to elect to be treated as domiciled in the UK for Inheritance
Tax purposes.
For further guidance on these elections, including how an election should be made, see
IHTM13040+.
For further information on foreign aspects see Inheritance Tax: Double Taxation Relief.
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Assets
10. Have all items referred to in the will (or in any other relevant document) been
included in form IHT400?
Risk
Assets referred to in the will may be incorrectly omitted from form IHT400, for example, where
the deceased no longer owned them at the time of death.
Mitigation
Care should be taken to identify all the items referred to in the will and ensure that they are
referred to in form IHT400 even if the deceased no longer owned them at the date of death.
Special attention should be paid to the following:
If the asset is a shareholding and the company’s name has changed tell us what the new
name is
If the deceased no longer owned the asset(s) at the date of death, what happened to the
asset(s)? Tell us if the asset(s) were:
- sold (tell us when, and say where the proceeds of sale are included on form IHT400)
- gifted (if within seven years make sure the asset is included on form IHT403 Gifts and
other transfers of value)
- lost or stolen - in which case we need full details of any insurance claim.
Where there are items referred to in the will that are not included in form IHT400 we suggest
that you provide a full explanation of the missing items in a covering letter or on page 15.
Explanation
All assets mentioned in the will or other relevant documents need to be accounted for. If there is
any information which is not clear to us we will ask you for clarification.
Effective from 6 April 2019
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For further guidance see IHTM12081+.
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11. Have all assets that the deceased held jointly on their death been identified?
Risk
Assets held in joint names are not always included correctly on form IHT400, particularly joint
property which passes by survivorship. Form IHT404 is not always fully completed when there
is joint property which can cause us to raise further questions to establish the correct position.
The identity of the co-owners may affect the valuation rules and whether any discount may be
claimed.
Reliefs could be incorrectly applied if it is wrongly presumed for example that the asset passes
to the spouse or civil partner.
Mitigation
Ensure that you ascertain any joint property held and identify full details of joint owners, shares
and survivorship provisions. You should complete form IHT404 fully. To check whether the
deceased owned any joint property see IHTM15001+, you need to:
check with associates of the deceased
check any records the deceased had
check any records you have
identify all other joint owners and their relationship to the deceased
find out who benefited from/received any income from any assets and who declared this for
Income Tax purposes
establish if there is anything to be deducted from the value of the asset and whether this is in
the same proportions as the beneficial interest
obtain details of the following:
− the intention of the coowners when purchasing/acquiring the asset
− whether there was any agreement between the coowners as to the beneficial ownership
of the asset
− what the enjoyment/use of the asset was and whether this changed before the
deceased’s death
− how any outgoings (i.e. utilities/insurance) were divided between the co-owners.
For example the deceased may have paid a larger portion of a mortgage. Any liability or
deduction should be in the same proportions as the share owned by the deceased. So if the
deceased owned a half share then a half share of the mortgage, or insurance costs, etc. should
be deducted. Any extra money paid over and above the share held by the deceased may be
further gifts to the other joint owner(s). Alternatively, the other joint owners may hold their
share(s) as bare trustee(s) for the deceased and indeed vice versa.
If the joint asset was acquired through inheritance you should let us know the details: the full
name of the previous deceased, date of death, relationship to the current deceased and the
Inheritance Tax reference if known.
If the co-owner is a trust you will need to consult with the trustees.
Explanation
We often find that joint assets are not included on form IHT400, especially those which pass by
survivorship, or that form IHT404 is not fully completed. It might be that your clients have
already updated ownership of bank accounts or land, for example by production of the death
certificate, and therefore, do not think that it is necessary to mention these assets for
Inheritance Tax and probate purposes.
Effective from 6 April 2019
19
Sometimes it is not recognised that bank and building society accounts held jointly with the
deceased to enable, for example, a child to assist with the payment of bills and day to day
expenses remain part of the deceased’s estate and should be reported in full. Checks also have
to be made where the accounts are held in joint names to see whether the co-owner has merely
been added on as a signatory rather than them actually having an interest in the funds within
the account.
If the deceased has transferred assets into joint names but continued to receive all the income
then you need to consider if a gift with reservation is involved. However, you need to be aware
that even if all the owners declared their share of the income for Income Tax purposes, and
indeed paid that tax, it may still be classed as a gift with reservation. You will have to consider
exactly how the asset was used during the lifetime of the deceased.
For further information see a case example.
For further guidance on gifts with reservations see Q14 and IHTM14301.
The intentions of the joint owners are not always obvious. It is easy to jump to the wrong
conclusion about the correct share enjoyed by the deceased. It could be that the deceased held
the asset on trust for the other owner(s) and only had a life interest.
For further guidance see our introduction to form IHT404 at IHTM15021+.
For further guidance on lifetime transfers see Q13 and IHTM15060.
For further information see Valuing the estate of someone who's died.
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12. Have all assets been identified that are either due to the deceased from
someone else’s estate, which have not yet been received, OR that have been
received by the deceased from someone else’s estate in the last five years?
Risk
Assets that the deceased has inherited are easy to overlook if the other estate has not been
fully administered.
Assets due to be inherited can be incorrectly valued.
Quick succession relief may be available and may be overlooked.
Mitigation
You should complete form IHT415 Interest in another estate as fully as possible. Revalue any
assets yet to be distributed as at the date of the deceased’s death, taking account of any related
property. For example, if the deceased owned a half share of a house and inherited the other
half, you are required to value the entirety, no discount being allowed for shared ownership.
You should ensure that assets received are accounted for in the deceased’s estate. If they are
not, find out what has happened to them and, if they have been passed on, ensure they are
declared as gifts on form IHT403 Gifts and other transfers of value.
Explanation
The value of assets due to be received are often returned at the value from the previous estate
instead of the value as at the date of the deceased’s death. The value of assets can increase or
decrease significantly between the date of inheritance and the date of the deceased’s death.
For further guidance see IHTM22001+.
The calculation of quick succession relief is not based on what the deceased actually received,
but on the chargeable estate in which the inheritance arose. The calculations for quick
succession relief do not take account of the costs of administration, although the costs incurred
Effective from 6 April 2019
20
against the deceased’s entitlement up to their date of death are allowed as a deduction against
the assets still to be received.
For further guidance see IHTM22041.
For further information see Valuing the estate of someone who's died: valuing gifts.
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Gifts and debts
13. Have all gifts or other transfers of value made within the seven years of the
date of death been identified?
Risk
All gifts and transfers of value made in the seven years to the date of death need to be included
in the calculation of Inheritance Tax. Transfers of value can be overlooked as they occur not
only when property or money is gifted to a friend or family member, but can arise in a variety of
other circumstances, such as:
where an asset is sold for less than its full open market value, such as a sale of a house to a
family member below the open market value
where a debt has been written off
where an asset is acquired by more than one person, but they hold that asset in different
proportions to their contributions
where property is transferred into a trust or settlement
where someone has an interest in a trust but that interest ceased before the person died.
Mitigation
It is strongly recommended that you check all bank and building society statements for the
seven years prior to death to see what transactions have taken place which may be regarded as
‘gifting’. We would suggest initially checking at least the previous three years statements; this
will provide you with a good indication of the gifting history of the deceased. If you find any
withdrawals and transfers which seem unusual in their amount or regularity then you should
consider a review of the bank statements for the full seven years.
Ensure that associates of the deceased, particularly the family, are asked whether they have
received anything from the deceased, including gifts for birthdays, Christmas or other religious
festivals, and on marriage.
Also check whether the deceased paid for anything on someone else’s behalf, for example
holidays, bills, or loaned them money which has been waived.
Check whether the deceased owned any property jointly with anybody else. If they did, check
whether the contributions to the purchase and other costs matched their respective interests in
the property. You will also need to check how the joint owners funded their shares of the
purchase price. It is quite common, for example for parents to give their children money to fund
the children’s shares, and that money is often not declared as a gift.
You need to consider any ancillary costs of the purchase of a joint asset, for example, fees and
Stamp Duty. If they were not paid in the same shares then a gift will have been made.
Check whether the deceased disposed of any property or assets within seven years of their
death. If they did, check whether or not they were sold for full market value and the sale
proceeds were received by the deceased. If they were not then the disposal by the deceased
may have included some element of gift which you need to tell us about.
Effective from 6 April 2019
21
Check whether the deceased transferred any property into a trust or settlement in the seven
years to the date of death. Trusts set up outside of the UK (and this includes the Channel
Islands and the Isle of Man in this context) are often not brought into account as they should be.
If there are any trusts, you will need to know from the trustees what assets the deceased
transferred into trust during their lifetime and check whether the deceased reserved a benefit.
Check whether the deceased had an interest in any trust which changed or ceased prior to the
date of death. The trustees should be able to tell you if there have been any alterations to the
trust which may be classed as transfers of value.
For further guidance on lifetime transfers see IHTM15060.
For further guidance on specific lifetime exemptions see IHTM14131+.
Explanation
We are less likely to raise further queries if you have provided us with as much information as
you are able to at the outset.
An area where the gift element is often forgotten is where the deceased has sold an asset,
usually to a family member, for less than the 'open market value', so the difference between the
'open market value' and the selling price should be disclosed as a gift.
When valuing lifetime transfers, the 'loss to the estate' and 'related property' principles should
be taken into account.
For further guidance on loss to the estate see IHTM04054.
For further guidance on related property see IHTM09731.
For further guidance on lifetime transfers: what is a potentially exempt transfer see IHTM04057.
For further guidance on immediately chargeable transfers see IHTM04067.
For further guidance on how lifetime transfers are brought into the charge for tax see
IHTM14531+.
For further information see Valuing the estate of someone who's died: valuing gifts.
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14. Have any gifts with reservation of benefit been fully considered and identified?
Risk
Assets may be gifted by the deceased, but the deceased may have continued to be able to
benefit from, or use, the property gifted during their lifetime. These gifts with reservation of
benefit may also be missed as these need to be considered even if the original gift was made
earlier than the seven years before death.
Mitigation
Check how any property gifted by the deceased has been used since the gift was made. If the
deceased continued to use the property, or continued to benefit from the gifted asset, the gift
may well be a gift with reservation of benefit. If there is a gift with reservation of benefit it will
need to be valued as at the date of death and the seven year rule does not apply. This is very
common with the deceased’s residence and other houses, land and buildings and also with
bank and building society accounts.
For further guidance on gifts with reservations see IHTM04071 and IHTM14301.
Explanation
When considering whether there is a potential reservation of benefit, consideration should also
be given to the pre-owned asset legislation and checks should be carried out to see whether an
Effective from 6 April 2019
22
election has been made and if any pre-owned asset income tax charge has been paid. If the
deceased made use of property that they had previously gifted, but they paid a full market rate
for the use of that property, providing full details will reduce the enquiries that we may need to
raise.
For further information on pre-owned assets see IHTM44000.
For further guidance see IHTM04072 and IHTM16121.
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15. Has evidence been gathered to substantiate claims for debts owed by the
deceased?
Risk
The main areas of risk that we see with claims for debts owed by the deceased are:
inadequately evidenced loans from friends and relatives
a deduction incorrectly claimed as spent on behalf of the deceased by friends and relatives
uncashed cheques which are for the benefit of someone other than the deceased
unreasonable funeral expenses
other loans, overdrafts or mortgage/equity release schemes where it is not evident how the
money has been used.
For further guidance on debts generally, including mortgages and secured loans see
IHTM28000.
For further guidance on restrictions to liabilities that can be deducted for Inheritance Tax
purposes see IHTM28010+.
Mitigation
Investigate fully and give full explanations on the relevant forms or in a covering letter. The letter
should include the exact terms and conditions regarding any loan from friends and family plus
details of exactly what the deceased used the loan for.
If assets were purchased with the loan confirm that the assets are reflected in form IHT400
including their value when purchased and their value at the date of death. Also confirm whether
the person who made the loan had at some time received a gift from the deceased.
You should also ensure that all the debts are legally enforceable and not statute-barred.
If any debt is not actually going to be repaid out of the deceased's estate then it cannot usually
be deducted for Inheritance Tax purposes, see IHTM28029.
If a loan is not evidenced in writing you should check whether the recipient or any witness would
be willing to make a sworn statement.
If there are any cheques uncashed at the date of death that were payment for goods and
services for the deceased, please confirm what they were for, making sure that the value of any
asset purchased is included. Cheques for gifts that have not been presented before death are
not an allowable deduction.
Where funeral costs are unusual please provide a breakdown of costs and copies of receipts
with an explanation telling us why the costs are considered reasonable.
For further guidance on uncashed cheques see IHTM28300.
For further guidance on funeral costs see IHTM10371+.
For further guidance on legally enforceable debts see IHTM28383.
For further guidance on statute-barred debts see IHTM28384.
Effective from 6 April 2019
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For further guidance on deductions from estate see IHTM10361.
For further guidance on where to find instructions about specific debts see IHTM10362.
For further information see Valuing the estate of someone who's died: debts and liabilities.
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Pensions, life insurance and trusts
16. Have all pension scheme lump sum death benefits been included on form
IHT409?
Risk
Full details of all lump sum death benefits paid from the deceased’s pension schemes should be
reported on form IHT409 whether or not they are chargeable to Inheritance Tax. This is
frequently overlooked.
Mitigation
Raise enquiries with each of the deceased’s pension scheme providers to establish whether a
lump sum death benefit was paid, the amount that was paid and the beneficiary of any payment.
The pension scheme provider should be able to advise whether the payment was made at their
discretion or you may need to check the scheme rules to see if any such payment is
discretionary. You should let us have copies of any such evidence obtained.
Explanation
Some lump sum death benefit payments are chargeable to Inheritance Tax whether or not the
payment is made to the estate. A payment that is made to the estate or the personal
representatives as of right is chargeable. Similarly, if the deceased pension scheme member
had a general power to direct such a payment to specified beneficiaries with a binding
nomination, it is within the estate and chargeable. Where a payment is made at the discretion of
the pension scheme trustees or providers, it is not within the estate and therefore not
chargeable to Inheritance Tax. If you do not complete all the boxes on the form or fail to send in
the relevant supporting evidence we may need to raise enquiries.
For further guidance see IHTM17000+.
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17. Have the deceased's pension arrangements been checked to establish
whether there have been any transfers, disposals, contributions or other changes
in the two years before death?
Risk
Where the deceased has not taken their full pension entitlement before they have died, the
unused funds may be paid as a lump sum death benefit that is not chargeable to Inheritance
Tax. In these cases a change to their pension rights or benefits or additional contributions made
in the deceased’s lifetime may have resulted in a loss to their estate which is a lifetime transfer
of value. In particular, there may be a loss to the estate if the pension scheme member is in
ill-health at the time of the change. Changes to pension arrangements made within the 2 years
prior to death should be reported on the form but these are easy to miss.
Mitigation
Raise enquiries with the pension company and any financial advisers as to whether there have
been any changes to the pension rights or benefits or additional contributions made in the two
years immediately before death.
Effective from 6 April 2019
24
Explanation
The deceased may have transferred their pension from one scheme to another. The benefits
under both schemes may have been held on discretionary trusts. When transferring from one
scheme to the other the deceased would have had a choice of what to do with the death
benefits which could have triggered a transfer of value, particularly if the deceased was in ill
health. Other changes or contributions made in the two years before death may similarly result
in a transfer of value.
For further guidance see IHTM17000+.
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18. Has the correct valuation of any life policy included in the estate been
checked?
Risk
Often the surrender or date of notification values for policies are provided in the form IHT400
rather than the required date of death open market values.
Mitigation
Ensure that the value requested from the life insurance company is the open market value at
the date of death.
For further guidance see IHTM20000+.
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19. Have the terms and ownership of any joint life policies been checked?
Risk
Policies are at risk of being omitted or excluded from the estate when they are held jointly.
There is also a risk that the wrong share of a policy may be included on form IHT400 and that
the type of policy is not correctly identified.
Mitigation
Read any policies and make sure you have asked the life insurance company for full details as
to beneficial ownership of a policy as well as legal ownership. Ensure that the insurance
company confirms who paid the premiums on any joint policy, for example, was it solely the
deceased?
Explanation
The policy may be incorrectly thought to be jointly owned just because it is in joint names. It
could be that the policy is in the deceased’s sole beneficial ownership.
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20. Has it been established whether the deceased had any interest in a trust set
up by someone else?
Risk
There may be trust events which need to be taken into account such as the trustees releasing
funds which were previously held for the deceased’s benefit. This could be a transfer of value
which is often overlooked.
Any trust interests will also need to be taken into account when arriving at the Inheritance Tax
estate and the apportionment of the nil rate band.
The changes made to the taxation of trusts following the Finance Act (FA) 2006 may need to be
taken into account.
Effective from 6 April 2019
25
Mitigation
Ensure that you are aware of all the deceased’s interest in any trusts, and have checked what
the Inheritance Tax position of the trust is, for example, is it a pre or post FA 2006 interest in
possession trust? Check whether any of the trust interests have been terminated, either partially
or fully, in the seven years leading up to death. The trustees should be able to tell you if there
have been any alterations to the trust which may be classed as transfers of value. See Q13.
Obtain full information about the deceased’s interest in the trust so that you are able to calculate
the Inheritance Tax position of the estate. You will need to consider whether the trust was
established before or after the FA 2006 as this will affect how you should deal with the
deceased’s interest for Inheritance Tax. It may be that the total Inheritance Tax liability needs to
be apportioned between the estate and the trust interests.
Explanation
Events which happen to a trust under which the deceased can benefit can mean that the
deceased is treated as making a transfer of value for Inheritance Tax purposes. These transfers
of value need to be taken into account when completing form IHT403 Gifts and other transfers
of value to ensure that form IHT400 is completed correctly. See Q13. You should obtain the
details from the trustees so that you can include any details of a release on form IHT403 Gifts
and other transfers of value, and the trust details on form IHT418 Assets held in trust. The
release of a trust interest may have an effect on the total of chargeable lifetime gifts and the
calculation of Inheritance Tax. However, it is the responsibility of the trustees to complete and
return a form IHT100 for the trust.
For further guidance on settled property see IHTM16030.
For further guidance on foreign property in a trust see IHTM16161+.
For more information see Trusts and Taxes: Trusts and Inheritance Tax.
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Valuations
21. Has the open market valuation at the relevant date(s) been obtained and used
(for example the date of death or date of gift) for each asset?
Risk
Valuation is an area of high risk for HMRC. This is particularly so where the valuation is not
referred to a qualified, independent valuer. However, it is not sufficient to simply refer a
valuation to a valuer. In the absence of proper instructions the valuer will not understand the
context nor have all the necessary details on which to make a proper valuation. Areas that are
frequently overlooked include:
For land and buildings - the potential for the development of the land (in particular large
gardens) and buildings (in particular dividing buildings into flats), the existence of tenancies
For farms - the need for separate valuations and details for the farmhouse, any other
dwellings, any farm/outbuildings and their usage, the land and any amenity land and their
rights such as fishing, shooting, mineral
For overseas assets - ensuring that valuation for Inheritance Tax purposes are clearly
understood by the overseas valuer as often valuations under overseas law are not on the
same basis as UK law
Where there is a ‘related property’ ensure that this has been taken into account in the
valuation following a lifetime event or death
For gifts you need to consider the ‘loss to the estate’ principle.
For further guidance on Foreign Property see IHTM27000.
Effective from 6 April 2019
26
Mitigation
In limited circumstances you can provide self-valuations for assets. For example, ordinary
household goods where individual items have a value of no more than £500, and the use of
publicly available data to obtain a valuation for second hand cars. Where you have provided a
self-valuation, explain how you have arrived at that value and why, if appropriate, a low or ‘nil’
valuation has been returned. Where there are antiques or collections and you are not obtaining
a professional valuation provide us with a full description of the items and details of any sales
proposed.
In all other circumstances and for all other assets you are strongly advised to obtain a
professional valuation and ensure that the valuers are instructed properly. In some cases you
may feel that it is appropriate to obtain more than one valuation.
When obtaining a valuation:
engage a qualified, independent valuer
explain the context and draw attention to the definition in S160 Inheritance Tax Act (IHTA)
1984 (market value)
provide all the relevant details concerning the asset, in particular ensuring the valuer is aware
of the need to take into account any points mentioned in the bullet points under ‘Risk’ above
ensure that copies of relevant agreements, or full details where only an oral agreement exists,
are provided so misunderstandings do not arise.
To help us verify overseas valuations you should also let us have the full address of any
property together with a full description including number and size of rooms plus any facilities,
for example, swimming pools. Copies of the overseas valuations should be sent to us together
with any translations. To assist with the valuation process involving overseas properties, in the
majority of cases photos will be required which show the general condition both internally and
externally. Providing photos at the outset will reduce the likelihood of us raising further enquiries
when considering the valuation.
For farms, always provide a plan and photos of the farmhouse, buildings and land. We will also
need to see a copy of the professional valuation reports that you have obtained.
For further guidance on agricultural value see IHTM24150.
There are special rules about valuing jointly owned assets where the other joint owner is the
surviving spouse or civil partner (much more rarely a charity or one of the political, national or
public bodies to which exempt transfers may be made) or a trust in which the deceased has a
life interest.
For further guidance see IHTM09731+.
Explanation
Where self-valuations are made we see wide margins of error. Lengthy correspondence may be
avoided if we are satisfied that all the relevant factors have been taken into consideration.
Valuations received are often inaccurate and the full valuation requirements of the IHTA1984
are not considered. We frequently receive incorrect valuations based on insurance values,
replacement values or book values. The general rule for Inheritance Tax purposes is that the
value of any asset is the price it might reasonably be expected to fetch if sold in the open
market at the time of death or transfer.
When looking at the value of gifts you need to consider the ‘loss to the estate’ principle. This
means that you look at the value of the estate before and after the gift was made. The
difference between those two figures is the loss to the estate and is the figure that needs to be
included on form IHT400.
For further guidance on loss to the estate see IHTM04054.
Effective from 6 April 2019
27
For further information see our guides Valuing the estate of someone who's died and
Valuing the estate of someone who's died: assets.
For further guidance on the concept of market value see the Valuation Office Manual.
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22. Have the valuations of any trust assets been obtained from the trustees and
do they include details of any apportioned or accrued income yet to be paid?
Risk
If correct valuations have not been obtained from the trustees it is impossible to calculate the
correct Inheritance Tax liability in the estate.
Mitigation
Ensure the trustees give you sufficient information to enable you to complete form IHT418
Assets held in trust. Establish if there is any income, accrued or apportioned, due to the
deceased which had not been paid prior to death. Establish if there had been any releases of
the deceased’s life interest. These will have to be shown as 'gifts' on form IHT403 Gifts and
other transfers of value, see Q13. Ensure that these are valued at the appropriate date.
For further guidance on accrued income see IHTM16171.
For further guidance on apportioned income see IHTM16172.
Explanation
The valuation of certain trust interests will need to be included in the Inheritance Tax calculation
of the estate. The nil rate band also needs to be apportioned correctly between the various
interests.
For further guidance on foreign property in a trust see IHTM16161+.
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General
23. Has the form IHT400 and all accompanying schedules been checked for
completeness and accuracy?
Risk
Omissions and mistakes may result in delays in processing form IHT400 and returning the
stamped form IHT421 Probate Summary or C1 Confirmation for Scotland to you or
unnecessary compliance checks being raised by us. In particular the questions on
supplementary forms are not always fully answered or insufficient additional information is
provided, which may result in additional compliance checks being made.
Mitigation
Make sure you have:
obtained and verified all the deceased’s details that are requested on pages 1 and 2 of form
IHT400
ensured that all the relevant boxes are fully and legibly completed on the correct form
answered all the questions and included all the required schedules
provided complete and legible copies of all other relevant documents
checked that the personal representatives have read the completed form and all
accompanying schedules and signed form IHT400.
Effective from 6 April 2019
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Form IHT421 Probate Summary or C1 Confirmation for Scotland must be signed by the
person or firm calculating the Inheritance Tax and sent with form IHT400.
Explanation
Even though the ultimate responsibility for accuracy rests with the personal representative(s) we
recommend that you complete a final check before submitting form IHT400. Completing the
forms and calculating exemptions and reliefs can be difficult. We receive a large number of
incorrect and incomplete forms IHT400 and schedules, forms we cannot read, and forms in
which rudimentary errors occur. These avoidable mistakes all lead to extra expense and delays
for you and your client.
Pages 4 and 5 of form IHT400 show which schedules need to be completed and submitted with
the IHT400. Check that you have included and completed all of the relevant schedules when
submitting the IHT400.
Forms which are often not completed fully are IHT404 - Jointly Owned Assets, IHT413 -
Business and partnership interests and assets and IHT414 - Agricultural Relief. Not fully
completing these forms, or providing insufficient information on form IHT413 or IHT414 about
the nature of the deceased's business or agricultural activities, will lead to delays in processing
the forms and may lead to additional compliance checks being made.
All forms IHT400 must now be sent to our office in Nottingham including those from Scotland
(confirmation may be delayed if you do not send form IHT400 and C1 to Nottingham).
Go to Inheritance Tax and probate forms.
For more guidance on the IHT400 - Declaration (pages 12 and 13) see IHTM10043.
Form IHT400 should now be used in all cases where a full Inheritance Tax account is required.
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24. Is the Inheritance Tax calculation accurate?
Risk
When calculating the Inheritance Tax due, exemptions and reliefs, in particular the transferable
nil rate band, are sometimes claimed when they are not available or the wrong amount is
claimed. The wrong threshold is also sometimes applied in the calculation. Errors in the
calculation of Inheritance Tax may lead to delays in processing form IHT400 and lead to further
payments or repayments of tax being required.
Mitigation
Use the IHT400 calculation worksheet to work out the Inheritance Tax. This covers the
common aspects, but not all of the more unusual ones.
Use the links and interest calculator on the HMRC website to recheck your calculation. Some of
the most common errors where particular care is needed are:
with the calculation of the transferable nil rate band - see IHTM43000+ and Transferring an
unused Inheritance Tax threshold
using the incorrect threshold or ‘nil rate band’  see Inheritance Tax thresholds
errors may potentially arise when applying the residence nil-rate allowance (RNRA) that came
into force on 6 April 2017. Please refer to IHTM46000 and the RNRA calculator
when 'interaction' applies to the value of certain legacies because there is property in the
estate which qualifies for agricultural or business property relief - see IHTM26101+
when 'grossing up' applies to certain legacies because part of the estate passes to exempt
beneficiaries - see IHTM26122+ and Grossing up calculator
Effective from 6 April 2019
29
joint assets passing by will or intestacy are included in the estate for 'interaction' and
'grossing' calculations, but assets held as beneficial joint tenants are not, (but remember to
take account of them in calculating the overall Inheritance Tax)
how to apply the reduced rate of Inheritance Tax where the deceased leaves at least 10% of
their net estate to charity (applies for deaths on or after 6 April 2012) - see IHTM45000
the calculation for Quick Succession Relief (QSR) - see IHTM22051
incorrect claim to Double Taxation Relief - see IHTM27181
when interest is due on the Inheritance Tax you are paying - see IHTM30341+ and
IHTM30352
where Taper Relief is calculated in connection with lifetime transfers. Taper Relief only
applies as a reduction in Inheritance Tax payable in respect of the gift and is dependent on
the date of the transfer. Taper Relief does not reduce the capital value of the transfer or gift.
For further guidance on Taper Relief see IHTM14611+.
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25. Has the Inheritance Tax payment that is due been paid?
Risk
If the Inheritance Tax and any interest due is not paid to the Accounts Office at Cumbernauld it
will delay the authorisation of form IHT421 Probate Summary or C1 Confirmation in
Scotland. If payment is sent in with form IHT400 this can also delay the process for obtaining
probate as the payment has to be processed by HMRC Accounts Office and cheques have to
be passed on to them to be banked before form IHT421 Probate Summary can be authorised.
Mitigation
Paying electronically is the quickest and easiest way. If payment is being made by cheque it is
very important that the Inheritance Tax reference number (see Q2) is written on the reverse and
the cheque is accompanied by a payslip. All payments should be sent to the Accounts
Office at Cumbernauld.
For more information on how to pay see our guide Pay your Inheritance Tax bill.
Inheritance Tax form IHT400 and associated schedules are available at Inheritance Tax
forms.
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Inheritance Tax Toolkit: IHT400 (2019 To 2020) (Cabinet Office)

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Completed 21 April 2021

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