Hi all,
I have an estate which is an exempt excepted estate (under £3m, passes to spouse etc…).
There are lifetime transfers within 7 years under £250k (perhaps £200k). However there was a CLT within the 14 year period, meaning that there is IHT due on the lifetime gifts.
Does that change the requirement (or not) to submit the IHT400?
The transferees are liable for the IHT - are we required to notify them of their obligations?
Any thoughts welcome.
Many thanks
Richard
I would be inclined to complete an IHT4000, to ensure HMRC has the relevant information.
If the recipients of the failed PETs do not pay the IHT within 12 months of the death, HMRC can assess the unpaid tax on the personal representatives.
I suggest it would be in the interests of the PRs (and the estate) to notify the donees of their obligations, and warn the residuary beneficiary(s) of the estate that the estate may have to pay the IHT on the failed PETs notwithstanding that, technically, such tax is recoverable from the donees.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Many thanks Paul - I was starting to think that this was the prudent thing to do!
Whilst I appreciate Paul's cautious approach, the fact that there are CLTs within the 14 year period prior to death does not it seems to me to preclude satisfaction of the “exempt excepted estate” Regulations (Reg 4(3) [SI 2204/2543 as amended]. In which case there is no requirement for completion of IHT400.
The liability of the PRs on failed PETs is not typically collected from the PRs even where the donees of the failed PETs failed to discharge their liability thereon [IHTM 30044].
Malcolm Finney
Whilst it may not be typical “The liability of the PRs on failed PETs is not typically collected from the PRs even where the donees of the failed PETs failed to discharge their liability thereon [IHTM 30044].” and HMRC say in the Manual, under the quoted section, that the Executors paying it is not taken as a soft option it has happened to a set of my clients and HMRC refused to even confirm what efforts had been made to recover the Tax. They ended up paying the tax and not having sufficient funds to litigate to recover the tax from the beneficiary.
Therefore to fully advise your client and protect your PI insurance from claims I would suggest that warning the execs of the possibility and trying to get something from HMRC to say that the estate IHT has been paid before you distribute the estate is necessary - of course HMRC may not correspond with you without a return having been lodged in the first instance…
If I am correct in my view that an IHT400 is not required due to satisfaction of Reg 4(3)
SI 2204/2543 then I don’t understand why a client should be advised to complete one. Any such completion would be the provision of gratuitous information to HMRC and I am not convinced that this would be appropriate unless, for whatever, reason a client (against advice) demanded that one be completed.
I am not suggesting that other advice should not be be tendered where reasonable/advisable but that is a different matter to filing an unnecessary IHT 400.
Malcolm Finney
Hi,
Would you not use an IHT100 to report the tax on the failed PETs and in the additional information box on the IHT100 explain that the estate was excepted so the tax due on the failed PETs is reportable via the IHT100 in this instance.
This avoids filing an IHT400 when not due but still reports the chargeable gifts and IHT due to HMRC as necessary.
Kat