I have an estate where W, the survivor of a deceased has died. The first to die, H, died in 1991 and left their estate in trust with W to receive lifetime income. H’s assets at his date of death included business assets and his estate was over the NRB at the time. H made no other gifts out of his will so did not use his NRB. The only paperwork we have suggests that an IHT return was done and ‘possibly’ IHT paid, but on the basis there was a spouse to spouse exemption I cannot figure out why any IHT would have been paid or the reason why a return would have been done. Nothing I have read referring to the rules in 1991 suggests that a return needed to be done. I’m wondering whether having business assets made it necessary to complete an IHT return back in 1991 and possibly pay IHT? Any thoughts? I’m trying to work out if there is TNRB or not.
The Appendix states that there was no relief before April 1976. Not for IHT, that is true, but there had been 45% relief from Estate Duty, since 1940 or thereabouts. I do not recall farmers routinely committing suicide or going out of business over death tax bills but then the survival periods for lifetime gifts were historically 5, and much earlier, 3 years. While there were GROB rules the identity of the donee did not matter (though no spousal gift exemption) and before 1965 there was no CGT.
Estate Duty was charged at graduated rates, 8 of them at repeal date. Grade 1 agricultural land is now between £10000-13000 per acre on average whereas in the 70s it was £200 and in the 80s and 90s £2500. Sch 17 FA 1969 sets out the final rates of ED. I leave others to crunch the numbers on any given acreage but allowing for inflation even with 45% relief ED rates were much more severe than a 20% marginal (and lower effective) rate except for smaller holdings. The top marginal rate before relief was 85%, limited to 80% effective, on an estate of £750,000. So 38.25 and 36% net of relief. A whole lot of acres at £200 per acre but only 300 at £2500 and 75 at £10,000.
I started practice in 1966 and was never aware of the kind of impact on succession planning that farming families appear to be facing on deaths between 6 April 2025 and, one imagines, the next general election. A-G v Boden was much employed by partnerships, and is still viable, and I expect a flurry of proprietary estoppel cases after a serendipitous discovery of an historic equitable transfer constituting a PET made well over 7 years past.
Advisers and clients have been lulled into a false sense of security by a long stable period of 100% relief but I can assure those not then in practice that satisfactory estate planning went on with only 45% relief in the ED era as well with only 50% relief or less from IHT from 1976 to 1991. Those who have taken advice before the £1m allowance became transferable between spouses might like to claim a refund from the Treasury for wasted costs (joke).
A good buy for many will be term assurance written in trust for the next and later generations, using available younger lives or a capital redemption fixed period. My business clients made virtually daily probability calculations of all manner of risks and I think many would bet on a reversal of tax risk after 2029. Term assurance for such a short period, to cover tax on lifetime gifts or on death, may be affordable even for the elderly given modern life expectancy for those in their 70s.
There may even be some hope that the regular bad publicity about real life families and their forced exit sales to Big Agri will bring about a U turn. The acute economic impact on the annoying peasants of Wales and Northern Ireland, where the metropolitan elite with slurry-free hands are vanishingly thin on the ground, may even penetrate the noise cancelling earbuds that are standard issue at No.11.