Claiming RNRB on a main residence failed PET with GWR

trifter1

Hi there,

My father passed away suddenly in 2020

In 2019 he gifted his main residence to me with a written write of residency. He lived in the propery until his death and paid some of the rates and bills

Given that he died within the 7 years the PET failed.

My question is, can RNRB be applied to this main residence given that it is effectively now back in the estate at least for tax purposes?

noh

If he gifted the house to you with a written agreement giving him the right to residency then the house value never left the estate unless he paid a full market rent.

noh

In answer to your question I don't think the RNRB can be applied see https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/residence-nil-rate-band-rnrb-facts/#
Why was your fathers house transferred to you what was the intention?
It appears the estate has lost the RNRB the gift was a gift with reservation of benefit so would not have been effective in reducing IHT and you now have a potential CGT liability if you sell the house.

Keep_pedalling

Oh dear! That was an exceedingly foolish thing to do. The gift was one with reservation, so it would never fall out of is estate as far as IHT is concerned. I believe noh is correct in that the RNRB (and any transferable RNRB if he was a widower) has been lost.  

If the property has increased in value since the transfer, you may also face the double whammy of owing CGT N the sale of the property.

Keep_pedalling

The triple whammy is that as the owner you don’t get any council tax relief on the empty house, that your would have got if your father was the owner at the time of death.

xylophone

I don't think that there can be any doubt that even had the father lived for seven years after making the gift, in view of the GWR, it could not have qualified as a PET.

However, in terms of the RNRB,  the OP should seek expert advice?
Does he also need to consider any transferable RNRB/NRB which may apply if his late father was a widower?

https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold#:~:text=When someone has sold, given,all these conditions must apply:&text=their direct descendants inherit at least some of the estate

When someone has sold, given away or downsized to a less valuable home before they die, their estate may still be able to get residence nil rate band (RNRB) if they qualify for a downsizing addition. To qualify, all these conditions must apply:

• the person sold, gave away or downsized to a less valuable home, on or after 8 July 2015
• the former home would have qualified for the RNRB if they’d kept it until they died
• their direct descendants inherit at least some of the estate

pphillips

noh said:

In answer to your question I don't think the RNRB can be applied see https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/residence-nil-rate-band-rnrb-facts/#
Why was your fathers house transferred to you what was the intention?
It appears the estate has lost the RNRB the gift was a gift with reservation of benefit so would not have been effective in reducing IHT and you now have a potential CGT liability if you sell the house.

I think this is the relevant paragraph from the above guidance relating to gift with reservation:
"A home that is a GWR can qualify. Where property is a GWR, there is no disposal on death as the disposal occurred when the gift was made. For the purposes of RNRB, GWR property is treated as being inherited by a direct descendant if the original gift was made to that person."
Unless I'm missing something, it seems pretty clear that the RNRB (and any transferable RNRB if he was a widower) can be claimed.