Can I just check the following as going around in circles relates to rnrb and downsizing
Residence into discretionary trust 2016, settlor still lives there until death and was potential beneficiary, so grob
Upon her death, whole estate closely inherited
So even if residence is in discretionary trust, as grob and her estate closely inherited can the rnrb and or downsizing allowance be claimed?
Man thanks in advance
No I don’t see that it can. There is no QRI on death and to come within the provisions extending RNRB to GROB’s the original gift would need to be to a lineal descendant and not trustees.
Thanks for response Nigel
All I have ever known about rnrb and my gut instinct says you are correct
However the thing is I can’t see anything to back that up and when referring to HMRC manual on my reading of it there is no requirement for beneficiary of gift (or in this case grob) to children (in this case) merely for children to take some part of estate to benefit from downsizing provisions
I must be missing something?
The provision is s8J(6) IHTA. The person regarded as having “inherited” the property comprised in a gift with reservation is the person to whom the gift was made. IHTM46014 has an example of a donee with a QRI. If the original GROB was to a DT it cannot be “closely inherited” by a relevant person within s8K.
For the downsizing allowance the original gift is not treated as a disposal of it: so it does not give rise to a QFRI because it is still in the donor’s estate and remains a QRI. If the reservation ceases and results in a PET it then becomes a QFRI. IHTM46056 explains. What is does not do is state in terms that a disposal of the property by the Donee is to be regarded as a disposal by the Donor resulting in a QFRI but that seems to be what s8(4C) and (4D)(b) provide because that will usually cause the reservation to cease. This is not necessarily so because Sch 20 FA 1986 may substitute other property for that originally gifted.
What is puzzling (to me at least) is that the calculation of the downsizing allowance, where the QFRI arises by a reservation ceasing, depends on whether some part of the estate is closely inherited. That estate ay death by definition must exclude the former GROB asset, even if it is still in the DT. The law does not require that the relevant part of the estate that must be be closely inherited should be closely inherited by the donee of the GROB.
The rationale of the straightforward non-GROB case seems to be that the persons closely inheriting some part of the estate would have inherited the former residence if it had been retained until death. One might have expected the DA to be available only if the original donee of the GROB closely inherited some part of the estate but that does not seem to be the law. The outcome apparently is that DA might be available where the reservation ceases in the Donor’s lifetime whereas it would not have been if it had remained in place until their death.
Jack Harper
Many thanks
Just trying to grasp at straws
As always thanks Jack