IHT incidence of tax on joint tenancy

I have a Testator with a house she lives in held as joint tenants with her partner A. Half share value £150,000 (Subject to 10-15% discount)
She has two other properties total value £330,000) to be left subject to tax to nephew B
Residue total approx £30,000 divided 30% charity, 70% Niece C. I will include usual exempt/non exempt clause
Total estate £510,000 less say £10,000 charity exempt.so tax £70,000.
Is tax apportioned between A 30%, B 66% & C 4% or is joint tenancy transfer deemed to have taken place first and used part of the nil Rate Band

The joint tenancy passing by survivorship will be aggregable with the estate for calculating the IHT due on death.

HMRC should normally be asked to assess the IHT on the (former) joint property directly on the surviving co-owner(s), who are liable to pay the IHT unless the will of the deceased provides otherwise.

On the basis of the values: £150,000 / £330,000 / £21,000 to be due to A, B and C, the apportionment 30/66/4 looks about right.

If a 15% discount is allowed for the (former) joint property, the apportionment approximates to 27/69/4.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

I was interested to read a post by Paul Saunders some weeks ago under the above heading in which he said that HMRC should normally be asked to assess the IHT on a formerly jointly owned property on the surviving co-owners(s). I have never come across this in practice and wonder how often it actually happens.

I am dealing with a very difficult estate, where among the many problems the surviving joint owner under a joint tenancy has refused to pay any part of the applicable tax. For cash flow reasons the Executors elected to pay the tax on the real property by instalments, two of which had fallen due by the time that the tax was being paid, so had to be paid from the estate. The other instalments remain outstanding. The deceased had made a homemade Will, which made no reference to the payment of the tax, so the surviving joint owner is prima facie liable for the relevant proportion of the tax.

The deceased was an elderly gentleman who lived with his brother and the other co-owner was his elderly “girlfriend” who had her own home. Neither of them ever occupied the property. The deceased provided all the funds for the purchase and I have seen correspondence between him and the solicitor who acted in the purchase, from which it was absolutely clear that the deceased wanted the property to be owned as joint tenants. When I saw Paul’s post I wondered how likely it would be that HMRC would assess the relevant part of the tax on the surviving joint owner.

In this estate the two Executors are the deceased’s siblings who live in Ireland. In the past where there were non-resident personal representative(s) in an estate containing a property on which the tax was being paid by instalments, HMRC always placed a charge on the property but they don’t seem to follow this practice any longer, presumably due to lack of resources. I don’t know if in the past HMRC would have put a charge on a property when it passed to a joint owner, as my experience of estates where a charge was imposed was where the property was part of the free estate.

Any experience of colleagues about the likelihood of HMRC assessing the other joint owner, or indeed placing a charge on the property for the outstanding tax, would be very welcome.

Cliona O’Tuama