I just wanted confirmation that my thoughts on the calculation of the RNRB/transferable RNRB where we are within the downsizing rules are correct as HMRC’s examples don’t quite fit.
I’m calculating the RNRB for an estate where the property was sold in July 2021 (for £820,000) and there was no home in the estate at the date of death (the deceased was in a care home at the date of death). Sufficient property was left to the descendants for the full relief to be due. The spouse died in 2002 and their estate was £1.8 million at the date of death.
At the date of the surviving spouse death, the estate for RNRB purposes was below £2 million but only because of a series of gifts prior to death as part of a planning arrangement advised by the solicitor. At the date of disposal of the property the estate was £2.9 million.
Whilst the guidance refers to calculating the lost relievable amount as if the individual had died at the date of disposal of the property, as far as I can see from the actual steps of the calculation, the legislation (IHTA 1984 s8 FE onwards) refers only to E - being the estate at death and the interaction between E and the taper threshold.
All other calculations of the lost relievable amount including the brought forward amount, whilst they look at the allowance which would have been available at the date of disposal of the property, don’t take into account the value of the estate at the date of the disposal. So whilst we are assuming the individual died at the date the property was disposed of, we are assuming their estate value was as at the date of death not at the date of disposal.
Can someone confirm my reading of this is correct and the fact that the higher total estate value at property disposal is irrelevant for the calculation purposes of the lost relievable amount including brought forward allowance.