I need to complete an IHT400 for an estate. The Will includes exempt and non exempt beneficiaries, but does not clarify how inheritance tax should be dealt with, nor does the Will file. After completing the calculations for both tests, it appears there is no inheritance tax. I am now wondering whether the Executors still need to agree which test is being adopted and this needs to be shown in the IHT400?
In my view, if both the Ratcliffe and Benham calculations produce the same outcome (i.e. no IHT is payable), there is no practical need for the personal representatives to make a formal election between the two for HMRC purposes. Ratcliffe and Benham are alternative methods of determining the incidence of tax where the will is silent; they are not elections available to the executors.
The IHT400 should simply reflect the correct values and exemptions, and if there is no tax payable under either approach there is nothing for HMRC to apportion. If the figures could otherwise appear unclear, a brief note in the additional information box or a covering letter explaining that both calculations have been considered and produce the same nil tax result may help avoid unnecessary queries.
The only caveat is that, if the choice between the two approaches would alter the beneficiaries’ respective entitlements (even though no tax is payable), the executors should still consider the correct construction of the will, as that is an estate administration issue rather than an IHT reporting issue.