Can I just confirm if a pension passes to the spouse of the deceased person does the spousal emption still apply under the new rules suggested by the budget ?
Many thanks
Collette
1 Like
Yes, it looks as if they do envisage that the spouse exemption will apply in full. See “Case Study 4” in their consultation document: Technical consultation - Inheritance Tax on pensions: liability, reporting and payment - GOV.UK
What we don’t yet know are the mechanics of charging and exempting. Will there be deemed beneficial ownership for IHT only like s142 variations with readback? If so a pensioner will not be able to leave the fund by Will. It may be that for IHT nominations will not be discretionary but like a revocable exercise of a kind of general power. The discretionary position needs to be preserved for insolvency law or the protection will be lost. The intention seems to be to apportion the liability like now between free estate and QIIP assets causing unfairness when a small FE and a huge QIIP fund (or vice versa) go in different beneficial directions. The impact on RPTs is going to be consulted on though as ever the outcome will be what HMG/HMRC wanted in the first place. I suspect there will be anti-fragmentation like the CGT rules on annual exempt amount of trustees. The legislative output will doubtless be the usual pig’s breakfast, but without APR now farmers are “enemies of the [working ] people”.
We have the absurdity of Comrade Murray urging use of lifetime gifts to avoid the new APR/BPR rules, State-Sponsored Tax Avoidance augmenting the Tax Gap but also scuppering HMT’s estimates of yields.
Jack Harper
What if the Spouse is a non-dom? Do we only get the nil rate band?