Net Estate exceeded £2m but less than £2.7m so there was tapering of the RNRB.
If the property sells for, say, £100,000 less than value at date of death, would there be an increase in the RNRB available given the reduction in the net Estate?
Section 191(1) of IHT Act 1984 states
Where—
(a)an interest in land is comprised in a person’s estate immediately before his death and is sold by the appropriate person within the period of three years immediately following the date of the death, and
(b)the appropriate person makes a claim under this Chapter stating the capacity in which he makes it,
the value for the purposes of this Act of that interest and of any other interest in land comprised in that estate and sold within that period by the person making the claim acting in the same capacity shall, subject to the following provisions of this Chapter, be its sale value.
If the sale value is substituted for the original value for the purposes of the Act then it would seem that an increase in the RNRB would apply.
Having looked at s.8D(d) IHTA 1984, which defines E as: “the value of the person’s estate immediately before the person’s death”, I am inclined to the view that a claim for relief under s.191 IHTA 1984 does not affect the amount of RNRB that may be claimed as it does not have any effect on E.
I would expect the same to apply to any relief under s.179 IHTA 1984.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
E is the value of the deceased’s estate on death (say 2.2m; pre share sale).
VT is the “chargeable estate” of the deceased’s estate on death (say 2.05m after 100k loss on share sale plus say some 50k of reliefs).
The RNRB is determined by E not VT.
Taper applies: [2.2m - 2m]/2 = 100k.
Max RNRB = 175k (say) - 100k = 75k (or if RNRB transfer then Max RNRB = 350k - 100k = 250k
Assume there had been no share sale post death:
E is the value of the deceased’s estate on death (say 2.2m).
VT is the “chargeable estate” of the deceased’s estate on death (say 2.15m after say some 50k of reliefs).
Taper applies: [2.2m - 2m]/2 = 100k.
Max RNRB = 175k (say) - 100k = 75k (or if RNRB transfer then Max RNRB = 350k - 100k = 250k
No change in RNRB amount as loss due to share sale only impacts VT not E and it is E which determines RNRB.
Paul and Malcolm I would interested to know why you do not consider s191 would affect “E”.
S191 (1)(a) refers to an interest in land comprised in a persons estate immediately before death and then refers to the value for the purposes of this act of that interest and of any other interest in land comprised in that estate shall be its sale value.
in S8D E is the value of the persons estate immediately before death.
S8D(5)(b) defines “E” ie “value of the person’s estate immediately before the person’s death”.
S5(1) defines “estate” as “the aggregate of all the property to which he is beneficially entitled”.
There is no explicit provision under which there is any authority to deduct exemptions, reliefs etc for the purposes of either s8D or 5 including s191.
S191(1) effectively grants relief for post death losses by substituting “sale value” for probate value which impacts the calculation of VT not E. If sale value was adopted this would not be “value of the person’s estate immediately before the person’s death”.
Thanks Malcom but still not sure I follow the logic.
Have just looked at HMRC manuals and at IHTM46012 it says:
Reliefs for the loss on sale of shares (IHTM34010) or land (IHTM33010) however are taken into account in the value of ‘E’ as they substitute the sale price of the asset in question for its date of death value. It may therefore be particularly important to take this into account when re-calculating a RNRB claim following a loss on sale claim where the value of ‘E’ had previously exceeded the taper threshold (IHTM46023).
As you say, the guidance at IHTM46012 seems fairly conclusive, thank you.
I’ve said many times that you learn something new every day. Nowadays it just seems you need to learn more and more every day just to keep on top of things
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
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Apologies to all for my incorrect view and thank you to Nigel for correcting me. I must admit I hadn’t checked HMRC’s manual. I did struggle with the reference to “for the purposes of this Act” in s191 but as I was aware other reliefs are not deductible (eg BPR) I assumed post death relief would also be excluded.
