I am assisting the executor of an estate of a woman who passed away in August 2023. Her estate is relatively straightforward (one property and some cash) although it is likely to be subject to some IHT. The issue I have is as follows:
Her husband died in November 1970 when the Estate Duty (as it was called then) allowance was £10,000.
There was no spousal exemption in 1970 (this was first introduced in 1972).
I have done a standard probate search which returned no results so am presuming that everything passed by survivorship - and thus have no way (that I know of) of calculating the size of his estate in 1970.
My understanding, therefore, is that anything that he did leave her would eat into the available TRNB (if it was £1,000 then we would lose 10% of the TRNB).
As it stands we have no way of calculating the size of the spouse’s estate in 1970.
Has anyone come across this situation before where the spouse died before 22nd March 1972 (when spousal exemption was first introduced, the survivor never remarries, and then passes away after October 2007 (when the TRNB came into effect)?
From speaking to the main beneficiary (a nephew living in Serbia) he believes it is likely that they owned their (modest) property in Luton, most likely with a mortgage, and we guesstimate that the size of the estate back then may have been between £1,000-2,000. We do have the spouse’s death certificate with his last known address so could probably calculate a value for the property.
Might HMRC be reasonable in these circumstances and take an estimate for for someone’s estate that died 53 years ago, or might it be the case that as we cannot prove the size of the estate that we cannot claim any TRNB at all?
I would appreciate any thoughts or input or anyone I may be able to speak with to find a resolution.
David
I assume that you realise that this forum is intended for discussion between trust professionals, and is simply not suited to provide specific advice on individual circumstances.
I appreciate that you may be assisting on a voluntary basis, but on the limited facts given I believe the answer should be readily available from any good local trust professional, so wonder why you should seek advice here? It seems obvious that the intention is to save tax, and likely that the tax saving will exceed any costs incurred, so are their any grounds for seeking pro bono advice?
Kevin
Thank you for taking the time to reply. I have found this forum a useful resource over the years and if my style of posting has lead you to believe that I am a non-professional seeking free advice then I apologise.
This forum was not my first port of call and I have also spoken with very experienced colleagues for their input. I, myself, deal with very complex estates on a daily basis. It would appear that the scenario I describe (there being 53 years between spouses’ deaths coupled with one being before the spousal exemption was introduced and the other after the Transferable Nil Rate Band was introduced) is exceptionally rare and as such could be an interesting topic for discussion on this forum. Does anyone else here have experience of such a scenario?
I would still welcome any positive input from the collective wisdom and experience of other members here.
HMRC’s general approach is set out in IHTM43060. You seem to agree with that “My understanding, therefore, is that anything that he did leave her would eat into the available TRNB (if it was £1,000 then we would lose 10% of the TRNB)”
So your problem is that after 53 years you have understandable difficulty in ascertaining the facts that would feed into the formula. Your efforts in that behalf are promising and The Valuation Office Agency will surely have records of the property value: they are still dealing with 1965 values for CGT after all.
HMRC’s approach to claims where the first death is before 9 October 2007 is set out at IHTM43011. In part it reads:
“But, where the death was many years ago, you should bear in mind that supporting evidence may not always be available. Provided the documents show the claim is valid and any tax due has been paid, you can release form IHT421/C1. You should then consider the risk to tax in deciding whether or not to accept the claim as offered. Where records don’t exist, personal representatives are entitled to complete their claim to the best of their ability and based on the information available. Provided there is no evidence that any other assets were chargeable, you can accept the claim.”
This predicament was dumped on both HMRC and taxpayers by politicians who only comprehend the big picture and none of the detail. However critical I am of HMRC on a regular basis I would be confident here that they would not want to be seen asking a judge to dismiss your claim if reasonably formulated simply because the politicians had dropped both parties in the mire of impossibility, especially if they have no retained records themselves. I think they have gone a long way in making such a broad Manual comment of the above nature.
Thank you for your understanding of the situation and your guidance in pointing me to the relevant sections of the Inheritance Tax Manual.
I appreciate your assessment that HMRC may be reticent to refer the claim to a judge if we have taken all practicable measures to provide accurate information and the claim is reasonably put together.
This sort of considered response is exactly what I was hoping for and I appreciate your input.
I don’t understand Kevin Mullen’s concerns with respect to David Park’s post. It seems to me to be as legitimate as any other of the posts appearing on the site. Indeed, I am not convinced despite Kevin’s comment that " I believe the answer should be readily available from any good local trust professional" that he is in fact correct.
Please forgive my colleagues for chiding you. As a seasoned user of the Forum you will perhaps have noticed that it is often used by those for whom it is not really intended. Rebukes are sometimes delivered, which is not ideal as the role of the Forum should ideally be conveyed to them before they post. No one has been able to suggest to the Administrators a way of deterring such persons without also discouraging those whom the Forum is meant for.
David
My apologies for having misunderstood your query, and been too quick to respond. I have dealt with several estates in which a spouse had pre-deceased during the Estate Duty regime and do not recall any problem at all - however I failed to appreciate the added complexity of the TNRB in your case/posting.
Having read your post fully, I agree with you that the point raised is worthy of debate on this forum - my apologies again.
Cliona
Sorry. My only personal knowledge of Latin was from church services over 50 years ago; thank you for correcting me.
Regards to all regular users of this forum, and the moderators.
Kevin
In the circumstances I hesitate to add to this thread, particularly as I consider it extremely unlikely that this can affect David’s case on the particular facts stated. However, for others viewing this forum, it may be relevant to point out that the treatment of surviving spouses was quite different under the Estate Duty system.
In simple terms, assets left on trust to/for the surviving spouse would be dutiable on the first death, but wholly exempt on the second death. This continues - see IHTA 1984 Schedule 6 Para 2.