I have been asked to advise on winding up a nil rate band trust following the death of the wife. The testator husband died in 2007 when the NRB was £300,000 leaving an estate worth £120,000 so that it is all held on the terms of the trust. A charge was placed over the main residence and index linked at RPI. The accumulated interest and capital is now £170,000.
My view is that the trust is entitled to the full nil rate band for the calculation of exit charges and the wife can claim 60% unused transferable nil rate band.
I am second guessing myself because it seems too generous from the IHT perspective and there is no CGT payable as far as I am aware because it is a simple debt and s.251(1) and (5) apply (presumably if the charge itself is appointed out to beneficiaries.) The only relevant tax seems to me to be income tax on the interest which was then accumulated, which of course, has never been disclosed or paid.
Am I wrong? I’ve spent ages going through the manuals and I can’t see I am wrong but it doesn’t feel right.