We act for executor of estate where deceased had a life interest. We submitted the IHT400 and included information about the trust. The executor paid the tax due on the estate. HMRC appear to have calculated a lower amount of tax due for the estate and transferred the excess amount paid to the tax due on the trust element.
I’m not sure what authority HMRC were acting under in taking estate funds and applying them for the benefit of the trust which has completely separate trustees.
Has anyone had experience of this and can anyone shed light on why HMRC would have done this.
Assuming the life interest trust was aggregable with the free estate, the way iht is calculated is to add the two together and tax the total figure. That tax is then apportioned between the two proportionately according to their values.
If you paid enough iht to cover the total liability, Hmrc may have assumed it was to cover both, and spit it between the two titles. They also have a habit of sometimes giving both titles the same shared reference, which can be confusing.
Therefore I suggest you work out what iht is due from the free estate and ask HMRC to refund you the balance, giving them the details of the solicitors acting for the trustees. Also ask them to ensure that the trust is given a different reference to avoid confusion.