Can anyone help with a grossing up query. It has us stumped here?
Scenario is this. A dies, full NRB available. Estate worth £2m Will leaves 2 properties to spouse, cash legacies free of tax totalling £60000 and then residue 60% spouse and 40% daughter. HMRC have grossed up the cash legacies and said more tax is due.
From the forms HMRC have sent me this seems correct but I was thinking about it and it seems that the cash legacies are payable first from the estate and although stated as being free of tax would then use the first part of the nil rate band. Then the balance of the nil rate band applies against the part of the estate passing to the daughter. No one other than the spouse benefits from the spouse exemption in this example.
Am I missing something fundamental here?
Thanks in advance.
Crombie Wilkinson Solicitors LLP