Help with IHT400 Q99 and Q105 (linked to IHT418) 22 June at 1:49PM in Deaths, Funerals & Probate 10 replies 163 views

Matt217th

Hi,

This is my first time posting, but have viewed the forums for a while as a guest. Unfortunately my father passed away earlier in the year and I have been left the probate to deal with. I have nearly completed all the forms apart from the questions from IHT418 and IHT400 relating to trusts and paying tax.

Basically my father put his property into trust with myself and him as trustees (he was also the settler) back in 2016. There is enough nil rate band for the property to not take his estate above the inheritence tax threshold. I am at a loss whether to answer question 99 (Assets held in trust on which the trustees would like to pay the tax now) or question 105 (Assets held in trust on which the trustees are not paying the tax now). I did ring the helpline, but for this part it was not very helpful (were great for other questions)

Does anybody know if question 99 would mean that I would personally pay tax on the property and it would not go towards his estate?

Also if I answered question 105 instead, would that mean that the value would not be taken from his nil rate band, but would instead be payable by myself at a future date?

The probate forms have been a mine field, but I am very close to finishing them. Thank you in advance for any help anyone can provide.

Thanks,

Matt

Keep_pedalling

It sounds like this was a terrible move, as not only does the house remain as part of his estate but it has also lost the ability to claim the residential NRB. This actually is a failed PET as he gifted his house to the trust within the last 7 years (even if the 7 years up it would still fail if he was still living in the house as that is treated as a gift with reservation). 

I could be wrong here but I think this has to be included on IHT 403 rather than 418.

The only tax issue directly effecting you is potential CGT when you sell the house and wind up the estate.

Matt217th

Yes, I agree it was not a good move, though was not my decision to do this. We would be using the house as our family home rather than selling. That is an interesting point RE including it on the IHT403 rather than filling in a 418.

Has anyone else been in a similar position?

Keep_pedalling

Just for clarification, you say the estate is below his NRB and that he died this year, which would mean you should not have to complete IHT 400 as no IHT is due, so why are you completing them?

Previously  you would have to have start with IHT 205 but that was scrapped on the 1 st Jan.

shiraz99

As above, why are you completing forms IHT400 if the estate is below the IHT threshold. Have you fully estimated the estates value using the online tool found here - https://www.gov.uk/applying-for-probate/before-you-apply

Matt217th

Thanks for taking the time to respond. I believe the reason it has to be the full probate is the fact that my father still lived in the property in the trust until he passed. When using the online tool, the following result is given:

'You’ll need to submit a full estate account to HMRC because the person who died gave gifts then benefited from them in the 7 years before they died'. This links to the IHT400 form.

Keep_pedalling

Matt217th said:

Thanks for taking the time to respond. I believe the reason it has to be the full probate is the fact that my father still lived in the property in the trust until he passed. When using the online tool, the following result is given:

'You’ll need to submit a full estate account to HMRC because the person who died gave gifts then benefited from them in the 7 years before they died'. This links to the IHT400 form.

Thanks for the clarification, I was not sure if you still had to do this under the new scheme, but obviously you do.

Coming back to your previous question I am pretty sure that a trust set up by the deceased that they benefit from is covered by IHT 403 not 418 which covered trusts set up by others, so the value of the house goes in box 104 not 99 or 100.

Before submitting I would take some professional advice both on this and on the trust going forward, especially if you want to wind it up so you have full ownership. Who are the trustees and is the trust registered with HMRC?

Matt217th

It is registered and the trustees were just myself and my dad. So as of right now, its just myself. Logically what you are saying makes perfect sense, or I would be entering the information twice. I will attempt to engage in professional advice for this question before submitting the form, though i've found it difficult to get someone to help when its not the full probate process I want completing.

Again thank you for taking the time to give your thoughts.

shiraz99

Matt217th said:

It is registered and the trustees were just myself and my dad. So as of right now, its just myself. Logically what you are saying makes perfect sense, or I would be entering the information twice. I will attempt to engage in professional advice for this question before submitting the form, though i've found it difficult to get someone to help when its not the full probate process I want completing.

Again thank you for taking the time to give your thoughts.

Best to speak to a tax specialist who specialises in inheritance issues and trusts rather than a solicitor, although both can often be found in the same firm.

SeniorSam

You have not mentioned your mother. Is she still living and owning part of the house, possibly with a lifetime interest in the trust?

As to form IHT400, for a death after 1st January 2022, this form is not required as long as the estate value is not liable to inheritance tax. A call to the Probate office should clarify this for you.

Keep_pedalling

SeniorSam said:

As to form IHT400, for a death after 1st January 2022, this form is not required as long as the estate value is not liable to inheritance tax. A call to the Probate office should clarify this for you.

As the OP has found it is not that simple. There are some estates that need to file even if there is no IHT to pay including one where a gift with reservation of benefit has been made, as applies in this case, and making gifts exceeding £250k in the 7 years before death, which may also apply in this case.

It also seems where trusts are involved HMRC are applying greater scrutiny.

https://www.gov.uk/valuing-estate-of-someone-who-died/check-type-of-estate