Rebate understanding from HMRC - when part of inheritance

Flint3000

Hi, really struggling to find clear information and hoping some clarity on here, and just impossible to get through on the numerous tries to HMRC. 

My nan died a couple of years ago, and her request was everything was split equally between 3 of us. Estate went through Co-op, but they closed the last part as HMRC were taking so long. Anyway our nan was due a large rebate back as they taxed her 40% on her pension when she cashed it in as a lump sum as she carried on working quite a while rather than claim the state pension when she reached that age and sadly passed away not long after this. 

HMRC have sent the rebate to the next of kin not to the estate. The next of kin is also the executor and beneficiary, who wants to pass the equal share on to the 2 of us. However, HMRC documents state they can only do so at 40% tax (although the total estate is very much under the £325k amount with this rebate) or cash at £3000 per year. 

I cannot clearly find if the HMRC rebate falls into heritance tax rules and 40% should not apply, or if HMRC work under different rules. 

Some information would be much appreciated. 

Thanks

Marcon

Flint3000 said:

Hi, really struggling to find clear information and hoping some clarity on here, and just impossible to get through on the numerous tries to HMRC. 

My nan died a couple of years ago, and her request was everything was split equally between 3 of us. Estate went through Co-op, but they closed the last part as HMRC were taking so long. Anyway our nan was due a large rebate back as they taxed her 40% on her pension when she cashed it in as a lump sum as she carried on working quite a while rather than claim the state pension when she reached that age and sadly passed away not long after this. 

HMRC have sent the rebate to the next of kin not to the estate. The next of kin is also the executor and beneficiary, who wants to pass the equal share on to the 2 of us. However, HMRC documents state they can only do so at 40% tax (although the total estate is very much under the £325k amount with this rebate) or cash at £3000 per year. 

I cannot clearly find if the HMRC rebate falls into heritance tax rules and 40% should not apply, or if HMRC work under different rules. 

Some information would be much appreciated. 

Thanks

Forgive me for responding to a question by asking a question, but it could be important. Did she reach her State Pension Age on or before 5 April 2016?

When you say she 'cashed it in as a lump sum', do you mean she started to draw her state pension (having previously chosen not to do so at her state pension age)? The fact HMRC appear to have offered a 'cash alternative' of £3,000 a year suggests you are referring to the state pension.