Main residence allowance

iansl2000

Hi
Can anyone tell me if this allowance is available to cover a gift of a house in the seven years prior to death or only if the house is bequeathed in the will itself.
Thanks
Ian

Tom99

Keep_pedalling wrote: »

Giving your home away is a pretty stupid thing to do, and it is even more stupid now that it means you lose the RNRB on top of all the other down sides.

Are you sure about that? See here : [FONT=Tahoma, sans-serif]www.taxinsider.co.uk[/FONT]

'The RNRB band will be preserved where the deceased has:

• downsized to a less valuable residence and that residence, together with assets of an equivalent value to the `lost RNRB’, have been left to direct descendants;
• sold his or her only residence and the sale proceeds or other assets of an equivalent value to have been left to direct descendants; or
• has otherwise ceased to own their only residence, and other assets of an equivalent value to have been left to direct descendants.'

Providing there was enough value left to direct descendants, would a gift of the property at any time in the past come under condition 3 'otherwise ceased to own'. Selling the property comes under condition 2, so does 'otherwise' include a gift?

The further conditions to be met:

'For the additional RNRB to be available, further conditions must be met:

• the individual dies on or after 6 April 2017;
• the property disposed was owned by the deceased and would have qualified for the RNRB had the deceased still owned it at death;
• a less valuable property, or other assets of an equivalent value if the property has been disposed of, are in the deceased’s estate;
• a less valuable property and other assets of an equivalent value are left to direct descendants of the deceased; and
• the downsizing occurred on or after 8 July 2015.'

In the 3rd of these additional conditions the word 'disposed of' would presumable include gifting the property?

So maybe if a main residence worth at least £125,000 was given away at any time after 7th July 2015 and at lease £125,000 in the estate at death in 2018/19 was left to direct descendants then the £125,000 RNRB for 2018/19 could be claimed?

Maybe it will depend what exactly 'downsize to a less valuable property' means. If you own and live in a say a £200,000 property, then give it away but rent it back, have you 'downsized' The term must relate to downsizing value-wise rather than how physically large the property is, since you could obviously downsize by moving to a cheaper area.

getmore4less

Was the gift absolute or with reservation(still living in the property)
who was the gift made to?

if this disposal event has happened then this will be relevant.

The cut-off date of 8 July 2015 means that any sale, gift or other disposal before that date cannot be taken into account.

HMRC manual.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46000

i only did a quick read but this seems to be one of the relevant pages, there may be others.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46053


A common gift is of the home to kids but still living in the property
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46056

Keep_pedalling

Tom99 wrote: »

Are you sure about that? See here : [FONT=Tahoma, sans-serif]www.taxinsider.co.uk[/FONT]

'The RNRB band will be preserved where the deceased has:

• downsized to a less valuable residence and that residence, together with assets of an equivalent value to the `lost RNRB’, have been left to direct descendants;
• sold his or her only residence and the sale proceeds or other assets of an equivalent value to have been left to direct descendants; or
• has otherwise ceased to own their only residence, and other assets of an equivalent value to have been left to direct descendants.'

Providing there was enough value left to direct descendants, would a gift of the property at any time in the past come under condition 3 'otherwise ceased to own'. Selling the property comes under condition 2, so does 'otherwise' include a gift?

The further conditions to be met:

'For the additional RNRB to be available, further conditions must be met:

• the individual dies on or after 6 April 2017;
• the property disposed was owned by the deceased and would have qualified for the RNRB had the deceased still owned it at death;
• a less valuable property, or other assets of an equivalent value if the property has been disposed of, are in the deceased’s estate;
• a less valuable property and other assets of an equivalent value are left to direct descendants of the deceased; and
• the downsizing occurred on or after 8 July 2015.'

In the 3rd of these additional conditions the word 'disposed of' would presumable include gifting the property?

So maybe if a main residence worth at least £125,000 was given away at any time after 7th July 2015 and at lease £125,000 in the estate at death in 2018/19 was left to direct descendants then the £125,000 RNRB for 2018/19 could be claimed?

Maybe it will depend what exactly 'downsize to a less valuable property' means. If you own and live in a say a £200,000 property, then give it away but rent it back, have you 'downsized' The term must relate to downsizing value-wise rather than how physically large the property is, since you could obviously downsize by moving to a cheaper area.

I stand corrected, although it seems a bit odd that that these tax rules assist people doing such a dumb thing.

https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#selling-or-giving-away-a-home

getmore4less

They have tried to make the RNRB as usable as possible.

qualifying beneficiaries is quite a large group many think it is just kids.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46013

iansl2000

getmore4less wrote: »

Was the gift absolute or with reservation(still living in the property)
who was the gift made to?

if this disposal event has happened then this will be relevant.



HMRC manual.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46000

i only did a quick read but this seems to be one of the relevant pages, there may be others.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46053


A common gift is of the home to kids but still living in the property
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46056

Thanks for the reply.
The gift hasn’t happened yet but the plan would be to give my house to my daughter and then I move to a second property that I already own so no reservation of benefit
Ian

Uxb

getmore4less wrote: »

qualifying beneficiaries is quite a large group many think it is just kids.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46013

Rather "amusingly" nephews etc are not considered to be relatives so cannot benefit while step children are.

This has lost the conservatives a few more votes locally where people with no surviving children or never had them want to leave it to a nephew/niece and find the their eventual estate cannot take advantage of the relief.
(Well Corbyn will cancel the whole lot anyway so it probably doesn't matter....)

Yorkshireman99

iansl2000 wrote: »

Thanks for the reply.
The gift hasn’t happened yet but the plan would be to give my house to my daughter and then I move to a second property that I already own so no reservation of benefit
Ian

This does not sound a particularly well thought out scheme. You really must both take individual professional advice on the CGT and IHT implications. You simply don’t have the professional expertise to avoid all the potential pitfalls. O competent specialist should save you at least his fee and much more. You need a RICS valuation and good IHT planning. You both also need to ensure your wills are up to date. Don’t use a will writer buts good local solicitor.

iansl2000

Hmm.... looks like the RNRB would not be available but a downsizing addition of the same amount might be.
See overview at:
https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#selling-or-giving-away-a-home

Definitely need proper advise though, it all seems fiendishly complicated.

Tom99

iansl2000 wrote: »

Hmm.... looks like the RNRB would not be available but a downsizing addition of the same amount might be.
See overview at:
https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#selling-or-giving-away-a-home

Definitely need proper advise though, it all seems fiendishly complicated.

Surely you won't lose the RNRB because it will be available on this 2nd property you are moving into. So if that property is worth over £175,000 (RNRB after 6/4/20) when you die you will be entitled to the full RNRB.

If its worth less than £175,000 then surely you will be entitled to RNRB to that value, lets say £100,000 plus any additional threshold from the downsizing you are planning to do, lets say this year, calculated as follows:

1 - Max RNRB 2018/19 = £125,000
2 - Value of existing home say £200,000 / £125,000 = 160% but Max 100%
3 - Value of home on death £100,000 / £175,000 = 57.14% Max 100%
4 - Step 2 less Step 3 so 100% - 57.14% = 42.86%
5 - Additional threshold RNRB 2020/21 £175,000 x 42.86% = £75,000
6 - Add this £75,000 to the £100,000 value of property on death = £175,000

So you don't lose out.
Look forward to others views on this calculation because every one of the examples on:

https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#downsizing-to-a-less-valuable-home

say:
'There’s no entitlement to the transferred additional threshold when Lillian/Micheal dies.....
Step 5. Multiply the maximum additional threshold when Michael dies (£175,000) by the percentage at step 4 (40%) to give a total of lost additional threshold of £70,000.'

There is not, as far as I can see, an example of where the additional threshold is not lost. Or am I missing something? Surely the examples should be of where there is an entitlement?