Transferable Residential Nil Rate Band

I am currently dealing with the estates of husband and wife who died earlier this year. Mrs died first in January leaving a modest estate (other than small specific legacies) to her husband. Mr died in early April. His estate is in the region of £890k.

The family believed that the property they lived in was held in joint names. However, it has now transpired that it was held solely by the husband.

The question posed to HMRC was whether we would be still be able to claim the unused Residential Nil Rate Band from the wife, even though she did not own any property. HMRC stated that we could not because she had not owned a property and therefore wasn’t entitled to the RNRB. Our contention was that we should be able to claim the TRNRB as it was unused and that if she had died in 2016 we would be able to claim it regardless of this.

Form IHT436 makes no mention of owning a property being necessary to claim the additional exemption (whereas IHT435 does).

The ability to claim the TRNRB would reduce the potential IHT bill by about £40k.

What are members’ thoughts on this?

Thank you in advance

Chris Shaw
Graysons Solicitors

Section 8F of IHTA 1984 seems to deal with this. See below.

Residence nil-rate amount: no interest in home goes to descendants etc.


Subsections (2) and (3) apply if the person’s estate immediately before the person’s death—

(a) does not include a qualifying residential interest, or
(b) includes a qualifying residential interest but none of the interest is closely inherited.


The person’s residence nil-rate amount is nil.


An amount—

(a) equal to the person’s default allowance, or
(b) if E is greater than TT, equal to the person’s adjusted allowance,

is available for carry-forward.

Jeremy Crouch

Tell HMRC to read sections 8F(1) and (3) IHTA 1984.

Malcolm Gunn

M B Gunn & Co Ltd

You are quite correct - HMRC should perhaps read their own guidance at IHTM46040 (particularly the last paragraph)!

Richard Whitaker

I would be grateful for some assistance on the RNRB and the TRNRB under the downsizing provisions.
H & W have owned a holiday house as joint tenants for 40 years – they have no other property. W now lives in a more suitable rented house.
H died 21/1/18 and W (aged 85) inherits H’s half share of the holiday house by survivorship.
W wishes to gift the holiday house to her son in October 2018 to reduce her estate below £2 million.
The house is worth £700,000.
If W dies in 2021 leaving cash assets equivalent to £700,000 to lineal descendants, I understand that she will have her maximum RNRB of £175,000 but will she have the TRNRB available as a result of her husband’s death in Jan 2018 under the downsizing provisions? Or because the property was held as joint tenants - is the TRNRB lost?

Many thanks in advance.

Louise Libby
Bennett Smith Solicitors

W will have the benefit of H’s TRNRB, and only needs to leave assets of equivalent value to the lost RNRB to direct descendants, not the full £700,000

Simon Northcott

The RNRB may not be available to either of them if the holiday home has has never been their residence.
Sarah Arundel
Taylor Fawcett

Thank you for your reply. I had been told that because W was gifting the house to a lineal descendant, the downsizing provisions applied and therefore H’s TRNB might be lost as a result.

Louise Libby
Bennett Smith Solicitors

Terminology is conflicting, with HMRC not being consistent. If the house is gifted no RNRB or TRNRB will apply. Instead the downsizing provisions apply to compensate for the lost RNRB and TRNRB. In these circumstances
H’s lost RNRB can be claimed under the downsizing provisions.

Simon Northcott