Is transferable residence NRB dependent on the survivor having a valid claim to RNRB?

Trusts Discussion
1

My case concerns a couple who owned their house as beneficial joint tenants. The wife died in 2008, and in 2009 the house was sold and the husband went to live in a house owned by a relative, and invested the proceeds of sale.

The husband died in 2020. He had no qualifying interest in the house he occupied and therefore no Residence NRB claim can be made. Downsizing relief is not available as the sale was before July 2015.

This is what the HMRC manual says at IHTM46040:

If there is any unused RNRB in the estate of the first spouse or civil partner of a couple to die, this unused part is available to increase the RNRB available to the survivor’s estate when they die.

It is important to remember that the brought-forward allowance only increases the maximum RNRB that might be available on the second death – strictly it increases the person’s default allowance. Any enhanced RNRB will only be available on the second death to the extent that there is a qualifying residential interest (IHTM46011) which is closely inherited (IHTM46013). Some examples showing how to apply the brought-forward allowance are set out at IHTM46043 and IHTM46044.

It seems they consider that transferable or brought-forward RNRB can only be claimed in conjunction with a claim for RNRB by the survivor’s estate.

Section 8G appears to indicate that a claim for transferable RNRB is possible in isolation, but that depends on a full appreciation of a number of complex definitions.

Have any members encountered this problem and with what result?

Tim Gibbons
Gibbons Solicitors Limited

2

Hi Tim,

Yes I believe you are correct in that unfortunately there will be no TRNRB as there is no RNRB :weary:.

I’d use the governments calculator to check but if in doubt I always go to the forms and having had a quick check; it does say, only use IHT436 if you’ve already used IHT436. :frowning:

Worth checking none of the investments benefit from BPR? AIM index etc?

Best wishes
Rachael Waring

3

The claim to a transferable residential nil rate band is possible irrespective of whether the surviving spouse leaves a qualifying residential interest to lineal descendants (or whether a qualifying residential interest is owned at the date of her death).

However, the surviving spouse’s RNRB will be nil if there is no qualifying residential interest (or downsizing addition) which is closely inherited on the spouse’s death. In which case the enhanced RNRB (ie the spouse’s own RNRB plus the transferred RNRB) is of no value/use.

This is in line with HMRC’s quote referred to in the post.

Malcolm Finney