HMRC IHT & Trusts Newsletter – August 2008
Contents
IHT
- Transferable nil rate band
- Meeting with representative bodies
- Inheritance Tax Account
- Applying for an IHT reference
- Section 144
- Northern Rock shares
- IHT email addresses
- Authority for repayment of Inheritance Tax
- IHT & Trusts Newsletter email notification
Trusts
Introduction
Welcome to the August edition of the IHT & Trusts Newsletter. If there are any issues you would like us to address in a future edition, please email our customer service team.
Dave Shaw
Head of IHT & Trusts
Transferable nil rate band (TNRB)
The Finance Bill 2008 received Royal Assent on 21 July 2008 and the provisions allowing the transfer of unused nil rate band are now law. We have written to all the estates where an uprated nil rate band was adopted provisionally to confirm the position. We have also produced draft guidance for the IHT Manual and this is still available on the Internet for comment.
The draft guidance for incorporation in the IHTM is available (PDF 222.3K)
One disappointing feature since the introduction of these new provisions is the very high initial failure rate by agents to provide the supporting details we ask for. The IHT216 claim form lists the documents that we want to see to support the claim for relief, and in only 20 per cent of cases submitted by agents are all the requested documents provided. This is in stark contrast to claims made by unrepresented taxpayers who manage to provide all the documents at the first time of asking.
If you do not provide all the requested documents with the claim, we cannot process it. This will inevitably delay the issue of the D18/C1, it increases costs for us and the estate unnecessarily, and because we have to rework these estates, it increases delay elsewhere as well.
It is very important to ensure you provide all the documents listed on the form when the claim is first made.
Meeting with representative bodies
On 18 July, we held a meeting with representatives from the Law Society, STEP, TACT, CIOT. ICAEW and the CAR Working Together Group to discuss a number of matters with them.
• Working more closely with agents
The first was seeking support for a program of work to explore the extent to which we might work more closely with agents and intermediaries. This will initially involve us in some fact-finding visits to volunteer agents and we are grateful to those who attended the meeting for agreeing to identify the firms who will take part in this work. You can find out more about this in 'Working more closely with agents' (PDF 29K). Since the meeting, we have decided to extend this program beyond IHT and include Trusts as well and we have written to those who attended the meeting to outline this wider coverage.
• Monitoring and compliance on excepted estates
Secondly, we explained current developments in our monitoring of excepted estates and tackling non-compliance. Until now, in addition to a random selection of estates, we have endeavoured to always contact you within the 35/60 day statutory clearance period when we have any questions relating to these grants. Within this brief window we have usually identified only property under-valuations on estates declared near to the value of the IHT nil rate band.
We are now piloting a new process where we compare the data provided on death with data the deceased provided to HMRC during their lifetime and information from other sources. We will be focussing our attention on estates where this information suggests that the estate does not meet the criteria to be an excepted estate. If an estate does not meet those criteria the statutory clearance will not apply (as the estate was not within the excepted estate regulations at the outset) and so you may hear from us some time after the 35/60 day period has expired. We will only be pursuing those cases where our evidence strongly suggests that the estate was never an excepted estate. If we uncover systematic failings in the processes agents go through in preparing an application for an excepted estate grant, we may wish to discuss with you where improvements might be made.
• Transfer of IHT banking
And finally, we spoke about the forthcoming transfer of cheque banking for IHT to the Accounts Office at Shipley. We have been using payslips for IHT payments for a little while now; and you may have noticed that since the end of June, we have been sending you a machine-readable payslip as a detachable slip on a printed document. This latest change is the next step along the way to transferring IHT banking to Shipley.
We now expect that this transfer will occur towards the end of 2008, and we hope to be able to publish the exact date in the October edition of Agent Update. When the transfer does occur, this will put IHT on the same footing as the rest of HMRC in that you will send your payments only to Shipley. All other correspondence should be, as now, with the IHT office concerned.
The main impact for taxpayers will be that we will no longer be issuing a receipt for IHT payments. You will still be able to track your payments through the entries on our calculations for tax already paid and money on account applied against tax and interest. We asked those at the meeting to consider this proposed change and let us know whether the absence of the receipt would create any insurmountable difficulties for agents and taxpayers.
We will provide more information in the October edition of Agent Update about the processes to follow once IHT cheque banking moves to Shipley.
Inheritance Tax account
We have been working hard for the last couple of years to develop a new IHT account and the final product is now being prepared for launch. The new form has been redesigned and follows the style and brand for HMRC forms generally. It has been user tested with unrepresented taxpayers and we have consulted with representative bodies about changes to the content of the form. We are working with the various software providers to ensure that their software will be available in time. Our own PDF version of the new form will also be available for download from the Internet.
The new form will be named IHT400 and the new supplementary pages will be numbered from IHT401 onwards. In response to feedback we have received, the form includes some new pages such as a page for listing bank and building society accounts and a page to notify us of the intention to claim conditional exemption for heritage assets. And we have incorporated form IHT216 so that a claim to transfer any unused nil rate band is included as part of the account.
We have also revised the way the calculation of tax is displayed to make it clear that any earlier lifetime gifts use up the nil rate band in chronological order, with any balance then being available against the aggregate estate on death. We hope this will make calculations clearer, in particular those involving the transferable nil rate band.
We hope to launch the new form in the Autumn.
Applying for an IHT reference
We are still seeing a number of cases where agents have applied for an IHT reference for an estate where there is no tax to pay. When you apply for a reference, we set up computer records ready to receive your payment so that we can minimise any delay in issuing the D18. If there is no tax to pay, the time in setting up these records has been wasted – time that we could have put to more productive use.
Please therefore make sure you only apply for an IHT reference where you are certain there is tax to pay.
Section 144
We have been receiving a significant number of accounts IHT 100 for distributions out of relevant property trusts set up by will, many of which refer to, and apply, the provisions of s144 IHTA 1984. Although the distribution may alter the amount of IHT on the death estate there is no need for the trustees to complete an IHT 100, even if the estate is an excepted estate.
You can find the guidance in the Inheritance Tax Manual at IHTM35184
Treatment of Northern Rock shares for the purposes of inheritance tax relief
A Question and Answer item has been published on HMRC website about the treatment of Northern Rock shares for purposes of IHT 'loss on sale' relief.
Further information is available
IHT email addresses
Please note that we have changed two of our email addresses.
Our customer service email address is now ihtcustomerservice@btconnect.com and our forms Orderline is now hmrc.ihtorderline@btconnect.com
Authority for repayment of Inheritance Tax
In the event of any IHT being overpaid please can we remind you to complete section K on page 7 of the IHT 200 giving the name(s) exactly as you want them to appear on the cheque.
IHT & Trusts Newsletter email notification
As the newsletter is now published regularly every four months, we announce new editions on the Internet as a What’s New item and in the new bi-monthly Agent Update, we will not be sending out email notification that a newsletter has been published in the future.
New versions of R185 (Trust Income) and R185 (Estate Income)
The R185(Trust Income) and R185(Estate Income) forms, which trustees and personal representatives use to provide beneficiaries with details of income from a trust or deceased estate, have been amended to reflect the changes to the SA107 Trusts etc. supplementary pages to the main return. The new versions of these forms can be accessed via the links below:
