New Residence Nil Rate Band for Inheritance Tax

relaxtwotribes

Would anyone have any opinion of the following situations?

1. My mother-in-law is widowed (father died in 1997). She has lived in a care home for 5 years and her main residence was sold 4 years ago. Her assets total ca.£1.2m which includes a property valued at £250k. This property (bought in her sole name) was a second family home for 40 years and was occupied for several weeks each year. The property has never been rented out.
After April 1 will her executors be able to claim a £100k Residence NRB for this property?

2. My mother is in an similar situation but without the second property. Slightly tongue in cheek, if she now purchased a property for, say, £175k, then how long would she have to reside in it for it to then qualify for the new Residence NRB?

Hopefully I have provided all the salient detail, but if not, then please ask?

uknick

Regarding your MiL, who is inheriting the house?

Have you seen this from HMRC?

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band#the-home

Where is your mother living at present? If she's in a care home, I'm not sure how you could prove she lived in any new home without actually moving her there.

This link discusses how long to live somewhere to avoid CGT to give you an idea of HMRC thinking,

http://www.property-tax-portal.co.uk/taxarticle42.shtml

relaxtwotribes

Thank you uknick. To answer your questions: MiL's house goes to her grandchildren (i.e. direct lineal descendants); and yes, I have seen the link, which gives rise to the question I pose and quote from the site thus:

"The home doesn’t have to be a person’s main home or have been lived in, or owned, for a minimum period. It can be any property that the deceased lived in as long as it’s included in their estate on death."

Those two sentences appear to be somewhat contradictory to me. My mother could buy a property and 'live' there for a few hours before returning to her care home and that would seem to satisfy the criterion, as there is no minimum period stipulation.

uknick

As the new residence band does not come in until April it is impossible to know what HMRC will consider to be "lived in".

Whilst HMRC can't use the dictionary definition for "home" which includes the words "where one lives permanently" I'd be surprised if they define home for IHT purposes much different to that for CGT.

kidmugsy

relaxtwotribes wrote: »

My mother could buy a property and 'live' there for a few hours before returning to her care home and that would seem to satisfy the criterion, as there is no minimum period stipulation.

I find it hard to understand why people insist on assuming that HMRC are stupid. To prove that a house has been a home, HMRC might reasonably ask to see utility bills, mail addressed to that house, etc. They are not going to take anybody's word for it, I hope.

Keep_pedalling

No need for any of this skulduggery, if someone has had to sell up to move into a care home they will be treated as they still owned their primary residency, so the nil rate band can still be claimed as long as they are leaving the bulk of their estate to their children or grandchildren.

relaxtwotribes

Keep_pedalling wrote: »

No need for any of this skulduggery, if someone has had to sell up to move into a care home they will be treated as they still owned their primary residency, so the nil rate band can still be claimed as long as they are leaving the bulk of their estate to their children or grandchildren.

But I understand that this will only apply where the home has been sold after 7 July 2015.

relaxtwotribes

kidmugsy wrote: »

I find it hard to understand why people insist on assuming that HMRC are stupid. To prove that a house has been a home, HMRC might reasonably ask to see utility bills, mail addressed to that house, etc. They are not going to take anybody's word for it, I hope.

Yes, that seems reasonable.

When you look at the sentence prior to the ones I quoted in post no.3 it reads: "If the deceased owned more than one home, the personal representatives can nominate which one should qualify for the RNRB." Therefore it would seem that the 'permanency' of the residency is not a qualifying criterion and that it is not the definition of 'home' that is required, but a definition of 'lived' is the crux. So the real question is: what is the minimum time that must pass for a person to establish that they have 'lived' in a property? Hence my tongue in cheek suggestion that a few hours would suffice.

Keep_pedalling

relaxtwotribes wrote: »

But I understand that this will only apply where the home has been sold after 7 July 2015.

You are quite right I stand corrected.