Hi

First post so please be gentle!

Trying to sort out my late mother's estate. She died in April this year (2018). Her estate is pretty straightforward (and could have been completed on-line) except for three small things which mean I have to complete a IHT400 form (plus all the associated schedules) and it is causing me no end of grief...

Her whole estate is less than the £325k inheritance tax threshold, so no inheritance tax to pay, but when I fill in the IHT400 pdf form to the best of my ability, it is telling me I will owe £8,400 inheritance tax which is clearly wrong. Whatever I do, I can't seem to make the form correct - so I am thinking that part(s) are either filled in (when they shouldn't be) or not filled in (when they should).

Three things mean that I have to fill in the IHT400.

1) She received a Widow's Pension from the company that my father used to work for (so I have to declare this on the IHT409??)

2) She had a small number of shares in three different companies - total holding amounts to less than £5k (so these shares have to be declared on the IHT 411??)

3) She originally purchased the house with us back in 1996 - her equity in the property at that time was 44%. She gifted her share to myself (sole beneficiary of her will) and my wife in August 2013 (which is less than 7 years ago) with a reservation of benefit (which means I have to complete an IHT403 form??)

Putting the values from these schedules (IHT403, IHT409 and IHT411) together with the small amount in her bank accounts (IHT406), a small amount of Household and Personal Goods (IHT407) and Life Assurance Policies (IHT410) is giving an inheritance tax liability (in box 119 the foot of page 12) as £8,400.

As her whole estate (her 44% share of the house at today's market value, plus the amounts in her bank accounts, the value of her shares and her personal possessions) totals around £240,000, so the inheritance tax figure of £8,400 is obviously wrong - but I don't know where the mistake/s in the IHT 400 is/are.

For such a simple estate, I am loathe to fork out around £2k to pay a solicitor to sort this out but smart as I am, filling in this blasted form is leaving me with a desire to commit suicide.

Any help gratefully received,

Thanks in advance,

Don

Just my opinion and what my accountant has done.

I'm in a very similar situation sorting out my wifes fathers estate, he died in April 2018. I use an accountant and I passed all the asset information to him and the estate is less that the IHT nil rate band. He also had a few shares and a company pension scheme.

All my accountant has sent for us to sign is an IHT 205 and PA1 (which we don't actually need to sign).

IHT 205 - https://www.gov.uk/gover...information-iht205-2011

So, based on what you state, I don't see that you need to complete an IHT 400 form as that is for situations where -

"Inheritance Tax is due - or a full account is required"

The only fly in the ointment may be the property gift/transfer. how it is documented if your mother continued to live in it.

Hi Jon,

Thank you for your reply.

I started filling out the IHT205 as I knew that my mother's estate wouldn't be liable for IHT and was relatively straightforward (or so I thought)..

On page 1 of the IHT205 form, box 2, it says "In the 7 years before they died, did the deceased make any gifts or other transfers more than £3,000 per year?" - the answer being 'yes'. It also says "If you answered 'Yes' (and the value is more than £150,000), stop filling in this form and complete IHT400 instead".

Sadly, it looks like I can't fill in the much simpler IHT205 and have to wade through treacle filling in the IHT400 and all the associated forms (which seem to vary between an additional five to something like nine or ten each time I have a new go at the form).

Any help/advice gladly welcomed.

Kind regards,

Don

Nope. Why would our 56% share of the house be taxable? The house was both our home (mine and my wife's) and also my mother's home too. Inheritance tax is payable on the estate of the deceased (if over the £323k threshold) and my mother only owned part of her home, not all of it. I know HMRC would tax daylight and oxygen if they could, but they can't make me pay inheritance tax on something that I paid for myself and didn't inherit!

She gifted her portion of the house (44%) to us in Q3 2013 and this is called a "Gift with a Reservation of Benefit" as she continued to live in the house (thus deriving benefit) even though she had gifted us her equitable interest in the house in 2013.

This gift would be liable for IHT if (a) it was large enough and (b) made recently (within the last 7 years). Beyond 7 years, it is ignored for IHT purposes. The amount of IHT payable is on a sliding scale - called 'Tapered Relief' and as Q3 2013 is between 4 and 5 years ago, it reduces the IHT percentage (if payable) from 40% to 24% [between 5 and 6 years it is reduced to 16% and between 6 and 7 years to 8%. Above 7 years, it is zero].


Again, no - there is simply no need.

The whole of my mother's estate is far less than the £325,000 threshold for IHT purposes - actually around 2/3 - so as I said in my post (#4 this thread), there is simply no need to use these extra allowances. Personally, given the complexity of the IHT400 form and the associated schedules, I don't see the need to further complicate matters by adding to the number of forms I have to fill in when there is aboluely no need. As it stands my liability for IHT on my mother's estate is nil - it is only that the IHT400 form is so complicated and I haven't filled it in correctly that the figure keeps coming out wrong.

Interestingly my wife contacted Which? Legal this afternoon asking if they could help with the completioin of the IHT400 and their reply was essentially "we don't touch those - they're far too complicated!"

Further to the above, my wife used the on-line IHT400 calculator today using the figures we had put in our latest version of the IHT400 and it said zero tax to pay - so maybe we've kind of got it right now.

When you go to swear the oath at the probate office, they check the form anyway, so I guess they'll flag it up there if anything is amiss.

Regards

Don

I think a decent local accountant could steer you through this process, for a few hundred pounds, get him/her to act as your agent.

You may even be able to submit just the IHT 205 form.

Her Majesty's finest are looking for bigger fish.