An IIP in a house and maintenance fund was created in 2008 in a divorce settlement. The life tenant died in March 2025. I act for the executors of the LT’s estate.
The IIP does not fit any of the categories in IHT 418 Box D1.
IHT100b(death) doesn’t seem to be relevant either as the ex-spouse’s IIP does not fit into any of the categories set out in Box E1.
Can anyone please advise me how to deal with the IHT return?
Both of these forms are to be used when reporting the ending of a “qualifying interest in possession” on the death of a life tenant. You have identified that the tests set out in IHT418 Box D1 and IHT100(b) (death) have not been met.
Can you make a deduction from this?
Of course, but the point is that the life interest I am dealing with isn’t a QIIP and there appears to be no facility for reporting the termination of such an interest on IHT418 or D31b(Death).
HMRC have advised me to write a letter to accompany IHT400 - as this must be a common occurrence, the forms should be revised to facilitate this.
Thanks for your ‘helpful’ advice.
Neil
I think the conclusion to be drawn is that you don’t have to report it at all as the death has no real implications for IHT. Page 17 of IHT400(notes) clarifies that IHT418 only has to be completed on the termination of a qualifying IIP. The notes to IHT100b(death) say the same.
Andrew
Neil, I replied as I would if a colleague had asked me this question, i.e. not by simply answering but trying to help them understand the answer.
As Andrew has said, there is no reason to report the death of the life tenant on either from IHT400 or IHT100b since IIPs created after 22 March 2006 are not Qualifying IIPs unless they are IPDIs, DPIs or TSIs. They are relevant property trusts and so the death of the life tenant is reportable on from IHT100c “Relevant property trusts proportionate (exit) charge”.
Neil,
As you say, it isn’t a QIIP. So presumably it doesn’t go on the IHT400/418 and no effect on life tenant’s estate for IHT purposes.
If it really did end on the life tenant’s death (as opposed to say falling into discretionary trusts) then it is just an exit charge from a relevant property trust so you use an IHT100c.
Was any ten year charge in 2018 considered / dealt with? If not then i would think it should be looked at now, before all the trust assets have been distributed.
Sara
Thanks to everyone who has replied.
Sara:
The life interest fund was created by the husband in July 2008 as part of a divorce settlement with his wife with money from another trust fund created in 1956, in which the husband enjoyed a life interest. He also had a power to appoint capital to his wife, which was used to create her life interest in the divorce settlement. On her death, the capital of her fund reverted to the 1956 fund.
There was no lifetime charge on the appointment - per Haines v Hill, there was no transfer of value. IHTA s. 10 would also apply. Presumably, if the trust was theoretically susceptible to a periodic charge, no tax would be due as because of this.
I will ask the trustees whether this was the case - they have no mentioned it in the instructions.
Neil,
Thank you. So all far more complicated than originally appeared. I wouldn’t like to comment on the treatment in the light of these details. Far too much to think about of the top of my head.
Sara
The fact that the entry disposition into a settlement is within s.10 or s.11 or on divorce by a court order, which HMRC accept is equivalent to full consideration and so within s.10, does not protect against subsequent RPT charges. These are TOVs made as chargeable transfers by the trustees under s.2(3). Unless the context otherwise requires.
IHTM4167 sets out HMRC’s view on how S.10 can apply to settled property. As regards RPTs they will only apply it to a “reduction in value” exit charge under s.65(1)(b) but not where property leaves the settlement on a s.65(1)(a) chargeable event and also not on a TYA under s64.
IHTM04085 on the application of s11 to settled property confirms that the section can apply to negate the termination of a QIIP under s.52: s51(2). This makes sense because of the treatment of a s52 charge is a deemed TOV by the QIIP owner under s3(4) and so is capable of being a PET under s.3A(7). But apart from the s.51(2) override the wording of s.11 is simply not apt to apply to charges on settled property, and so not to RPT charges.
Jack Harper