Inheritance tax query - who have we inherited from?

Hitting

I'm aware of nil rate band ,but if gift from assets in excess of it are given in lifetime,hence reducing nrb by gift value expiring at end of 7 years!,but if donor dies after6 years of gift does the deficit from nrb reduce in value? Eg nrb = 625k, remains at 625k at end of 7years, but if donor dies after 6years and gift is say 100k does nrb become 525k or something better perhaps 600k, should taper relief apply to gift value?

getmore4less

which bit of "Taper relief only applies to gifts in excess of the nil rate band" did you not understand?

start here
https://www.google.co.uk/#q=HMRC+IHT+PET+taper+relief

this covers most of it
http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm
.

Hitting

As well as referring to tax,does taper relief also apply to the amount that is deducted from the nrb?

getmore4less

In the above link at this point.

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm#4

Example

Joe made a gift of £350,000 on 15 January 2006. He died on 15 April 2009. The Inheritance Tax threshold for the year he died is £325,000.
Follow the steps below to work out the Inheritance Tax due:
Step 1: take away the threshold from the value of the gift: £350,000 − £325,000 = £25,000. So Inheritance Tax is due on £25,000
Step 2: work out the Inheritance Tax at 40%: £25,000 × 40% = £10,000
Step 3: the gift was made within 3 to 4 years of death. So Taper Relief at 20% is allowed: £10,000 × 20% = £2,000
Step 4: take away the Taper Relief from the full tax charge: £10,000 − £2,000 = £8,000
In this example, Taper Relief reduces the amount of tax payable from £10,000 to £8,000.


The nil rate band is now used up and not available for any other part of the estate

Hitting

If a house is owned and registered as Tenants in Common by a married couple and they decide to include two sons in the ownership all as Tenants in Common, does half the value of the property become a PET for IHT purposes and hence only moves out of the married couples estate after 7 years ?

Mojisola

Hitting wrote: »

If a house is owned and registered as Tenants in Common by a married couple and they decide to include two sons in the ownership all as Tenants in Common, does half the value of the property become a PET for IHT purposes and hence only moves out of the married couples estate after 7 years ?

If the couple continue to live there, it will be a gift with reservation and will be included in an IHT assessment.

John_Pierpoint

seafarer82 wrote: »

Bit of an odd question, as I'm sure most people would know where their inheritance has come from, but can anyone confirm if my reasoning is correct?

My father died in 2000 and his estate was split 50:50 between myself and my sister. His estate was under the inheritance tax threshold, including a share of his parents' house that he'd inherited from his late father. Our grandmother and aunt were still living in the house so there were no plans to sell it at that point.

In 2007 our grandmother died and her will stated that her share of the house should be divided 50:50 between our father and aunt, but that if our aunt died while living at the property (as has happened) then her share should go to our father in full, or his children if he was deceased.

Have we therefore inherited the second part of the house from our father's estate or our grandmother? I assume it would be directly from our grandmother's will, rather than it being classed as entering our father's estate and then coming down the line to us? If the second part of the house was classed as entering our father's estate at any point then it would push it over the inheritance tax threshold and we would need to advise HMRC etc. I'm pretty sure this isn't the case but just need to check.

Please come back and let us know what your solicitor eventually agrees with the tax man.

I had a similar situation with my great aunt, who very nearly got her telegram from the queen, having managed to outlive her niece and nephew.

In my opinion, but I might be out of date because this was pre 2006, your aunt owned the beneficial interest in 100% of the house, partly as a tenant in common in her own name and partly as the beneficiary of an interest in possession trust. The IHT liability would be based on her estate (including 100% of the value of the property) and the tax payable would come from her executor and the trustees of the interest in possession trust in proportion to their legal ownership of her beneficial owned assets (ie if aunt is worth £1,000,000 then there is £270,000 of tax to pay. If the bit of the house she does not legally own is worth £100,000, then £27,000 needs to be paid by the trustees of the interest in possession trust.)
If this is not the case, the chunk owned by the interest in possession trust, gets into another can of worms when it comes to calculate the capital gains tax payable when the property is sold..