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IHT400 - needed or not?

Having read the guidance notes for form IHT400 I believed I wouldn't need to complete the form as my late Fathers estate would be exempt because it doesn't meet the IHT threshold. However HMRC have said that I need to complete it as he has left the house in Trust  - ie: My mother can continue to live there but when she dies his share will then be passed to his children. Is this correct? Do I need to complete IHT400?
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Comments

  • mybestattempt
    mybestattempt Posts: 298 Forumite
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    edited 17 August at 6:13AM

    If HMRC must have decided an IHT400 is needed, I'm not sure if you can refuse to complete it.

    Has probate been granted? If not, the process may be delayed until you submit an IHT400.
     
    I'm assuming HMRC have written to you, does the letter say they think inheritance tax may be due?

    Perhaps, you misunderstood what you need to include to establish the value of the estate at date of death?

    Did you include a value for your late father's share of the property at the date of death when you did your own calculation of the value of the estate, or did you assume because the will created the trust that the value of his share at date of death need not be included?
     
  • Keep_pedalling
    Keep_pedalling Posts: 18,228 Forumite
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    I think there may be a misunderstanding here an immediate post death interest trust with a spouse getting the life interest is covered by spousal exemption, does not need the use of the residential NRB and certainly does not require the completion of an IHT return.

    Were your parents married or in a civil partnership? Did HMRC tell you this over the phone or has this been flagged up by the probate office? 

  • Golden2sun
    Golden2sun Posts: 6 Forumite
    First Post
    Yes my parents were Married. My sister who is also one of the Executors rang up the HMRC helpline and was told we needed to complete IHT400. 
  • Golden2sun
    Golden2sun Posts: 6 Forumite
    First Post

    If HMRC must have decided an IHT400 is needed, I'm not sure if you can refuse to complete it.

    Has probate been granted? If not, the process may be delayed until you submit an IHT400.
     
    I'm assuming HMRC have written to you, does the letter say they think inheritance tax may be due?

    Perhaps, you misunderstood what you need to include to establish the value of the estate at date of death?

    Did you include a value for your late father's share of the property at the date of death when you did your own calculation of the value of the estate, or did you assume because the will created the trust that the value of his share at date of death need not be included?
     
    My sister (joint Executor) rang up the HMRC helpline and was told we needed to complete IHT400 in order apply for probate. 
  • Keep_pedalling
    Keep_pedalling Posts: 18,228 Forumite
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    The only reason I can think of why she was told that is because the advisor misunderstood the question. If your father had been the beneficiary of a trust or if more than £325k was going into a discretionary trust then yes that may have required an IHT return, but a will that creates this type of trust for a spouse does not in itself create the need to do one regardless of the value of the house.


  • Golden2sun
    Golden2sun Posts: 6 Forumite
    First Post
    Ok thank you for your advice, it is very difficult to find an answer online, the Government IHT website is confusing and I don't seem to be able to find the answer. The HMRC helpline is closed until Monday morning I will call them again for clarity but your answer makes sense to me  - my Father ensured that my Mother has a lifetime interest in the house which she owns 50%, my Fathers Will set out that she can remain living there and when she passes away my Fathers 50%  will then pass to his children. My mother has a mirror will. 
  • Keep_pedalling
    Keep_pedalling Posts: 18,228 Forumite
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    Did he leave everything else to your mother?
  • mybestattempt
    mybestattempt Posts: 298 Forumite
    100 Posts Name Dropper
    edited 17 August at 12:57PM

    @Golden2sun

    I've just seen from another post yesterday, that you're just starting the probate application. I thought you may already submitted it and HMRC had contacted you.

    I agree with @Keep_pedalling.

    Unfortunately, this is the not this first instance I've come across, in just the last few weeks, where HMRC helpline advice or an answer on the HMRC Community Forum is not in line with the official guidance.

    The  HMRC Inheritance Tax guidance for excepted estates is here:

    https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm06031


  • Golden2sun
    Golden2sun Posts: 6 Forumite
    First Post
    Keep_pedalling: He left each of us ( his 3 children) a lump sum each, everything else left to my mother. 
  • Keep_pedalling
    Keep_pedalling Posts: 18,228 Forumite
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    Keep_pedalling: He left each of us ( his 3 children) a lump sum each, everything else left to my mother. 
    That will reduce the transferable NRB available to your mother’s estate, but if that totals over £325k IHT will be due and a IHT return will be required, unless the three of you do a deed of variation to give your mother a larger share.
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