Is IHT400 necessary (Farm/land/businesses) if variation of intestacy results in exempt estate

Trusts Discussion
1

A farmer died intestate. As a result of his children (adults) being entitled to half the residue, there would be IHT unless APR and BPR were successfully claimed.

If the children vary their entitlements in favour of their mother (deceased’s wife), so that spouse exemption could be claimed on the whole estate, would it still be necessary to submit an IHT400 with a copy of the variation to show the effect of the variation?

2

Yes, it would still be necessary to submit an IHT400 in the circumstances that you have outlined.

Cliona O’Tuama

3

If the gross value of the estate does not exceed £3m, the net chargeable estate value does not exceed the NRB (and the other conditions here: IHTM06013 - Rules about excepted estates: exempt excepted estates - HMRC internal manual - GOV.UK are met) then assuming only spouse exemption or charity exemption are claimed, the estate is classed as an ‘exempt’ excepted estate and there is no need to file an IHT400. (HMRC usually accept this if the DoV is completed before the Grant is obtained, see IHTM06035.)

If BPR/APR are being claimed, then the estate is not excepted and IHT400 is required.

Ihsan Ali
I Will Solicitors Ltd

4

I was always taught that if you are filling in an IHT205 (or considering whether an estate is excepted) it needs to be on the basis of the estate before any variation. If you are filing in an IHT400 then that can be filled in taking into account the deed of variation. In this case as the estate is not exempt before the variation on that basis you would need to completed an IHT400.

5

Claire

The Manual reference identified by Ihsan above (IHTM06035) seems pretty clear that HMRC are happy to waive IHT400 in these circumstances. It would seem a shame not to take advantage of it.

Andrew

6

Thank you all very much - I have just received final confirmation that all the children are happy to vary in favour of their mother and so the estate will be an exempt excepted estate and I have not yet submitted an application for the grant of letters of administration and so will attend to the variation first. This has been most helpful.