Inheritance Liability.

madbadrob

Whilst mention of IHT at the huse value in 1998 is how I understand it how much interest on that would there be? Would HMRC waive interest?

Rob

antrobus

madbadrob wrote: »

Whilst mention of IHT at the huse value in 1998 is how I understand it how much interest on that would there be?

Interest rates for Inheritance Tax
http://www.hmrc.gov.uk/rates/iht-interest-rates.htm

I'd guess that the cumulative interest to date would about double the bill.

madbadrob wrote: »

....Would HMRC waive interest?

No, why would they. They've got a £1.6m asset as security.

getmore4less

Some rough numbers

Not clear, but I don't think it compounds(which is good)

http://www.hmrc.gov.uk/tools/inheritancetax/interest-rate-calculator.htm

Inheritance Tax interest calculator - result
What you told us:

Start date for interest: 01/01/1998
End date for interest: 1/4/2014
Inheritance Tax owed: £100,000

Result:
The interest due from the figures you supplied £56,234.97

so for each £100k max interest around £56k (you get 6 months before the clock starts)



Nil rate band in 1998 is £215 or £235k say the houe was worth around £500k (any other assets at the time?)

err on the high side say around £300k over the nil rate band at 40% £120k interest £68k so perhaps a total bill under £200k

(£200k total is a IHT bill of £128k so a gain of £320k)

Crabapple

The OP is going to need to go back to the start and deal with grandmother's estate - find out all the values and put together an account and apply for probate so that the house can be transferred and/or sold.

The difficulty will be paying the IHT. It's over 10 years since the death so no instalment option available, the executors will either have to produce the cash themselves or take out a loan to pay the IHT and interest. Until it's paid they won't be able to get probate issued.

I guess that if the father was a hoarder (I guess that's what was meant in the first post and an autocorrect) then the paperwork is all still there, but goodness only knows how hard it will be to find.

Crabapple

Oh, and no the interest doesn't compound and there shouldn't be penalties, but it will as worked out above be quite a hefty sum.

On the plus side the house is a substantial asset and will make getting an executors loan easier.

BobQ

getmore4less wrote: »

IHT does not apply to gains it is based on asset values at Date of death..

Also the initial issue here is the death in 1998 and any taxes due at that time on the value at that time.

Yes you are right. I have edited the original message. Thanks for pointing this out. Somehow I forgot that when wrote the last sentence!:o

madbadrob

The nest question is what interest rate do they use when working out the interest owed. Would this be the rate then, now or an average of the 2

Rob

getmore4less

madbadrob wrote: »

The nest question is what interest rate do they use when working out the interest owed. Would this be the rate then, now or an average of the 2

Rob

link has already been provided earlier

It's a variable daily rate for each day interest is due.

http://www.hmrc.gov.uk/rates/iht-interest-rates.htm

uknick

Crabapple wrote: »

Oh, and no the interest doesn't compound and there shouldn't be penalties, but it will as worked out above be quite a hefty sum.

On the plus side the house is a substantial asset and will make getting an executors loan easier.

Just out of interest, why are there no penalty charges?


I can understand an interest only charge when you have declared the liability and can't find the funds to pay it immediately.

But, in a case such as this, i.e. declaring late, if this is what it is, why no penalty for declaring late?

EasySolution

I handled a very similar case recently, though our death was in 2005.

Quite apart from the interest, for which there is a calculator on the HMRC website, there is a fine due for non payment of tax when it was due.

This can be as much as 100% of the Tax. There are various discounts available for very simple things like voluntarily paying the Tax and interest without any argument.

There is also the classic conundrum in this situation in that the value created by the property cannot be used to pay the Tax because it (the house) cannot be sold until the Tax has been paid.

A good solicitor will be able to advise you of the special type of Grant of Probate available to deal with this situation.