hmrc mistake - probate asset value is wrong

bikeman

I just received my unique probate code from hmrc and the value of assets for probate is wrong.

Just to be clear it is correct on the iht400 but someone at hmrc typed in the wrong figure in the letter.

It's annoying that they did this because we paid the iht early so we could apply for probate asap.

So my question is should I just go ahead and apply for probate knowing that it is wrong. Does the figure on the grant really matter?

Do I apply with what I know to be the correct figure?

Or do I bother with the hassle getting through on the phone to hmrc and then wait a month or so for them to correct and resend?

bobster2

Well I think it depends - how wrong? Too high or too low? And could this relate to the value of a property (e.g. could it create a CGT liability).

bikeman

The figure is about £200k lower than it should be. It doesnt relate to anything, as I said I already have cleared the iht, this is simply a typo by hmrc. 

TripleH

First of all, keep all relevant documents, the ones showing the correct amount and wrong amount.

Also keep evidence that they tax has been paid

I would write to HMRC (keep proof of postage) asking them if there was a typo in their letter and state the date you filed paperwork, the date you paid the inheritance tax and the payment reference you used (keep this letter).

This shows you spotted an issue and asked the question promptly, if they ignore you or try getting angsty later you can say you did ask the question but not your fault if they ignored you. 

HMRC make mistakes but taxpayers evade tax, so always best to ask and throw it back at HMRC.

frayedknot

It's very important that the probate valuation is spot on. If you subsequently sold the house for it's true valuation the estate would be landed with capital gains tax bill for the £200,000 gain.

bikeman

It's transpired that the asset value for probate has excluded foreign assets (shares). When I called hmrc I was told that this was incorrect and the probate code letter would be reissued.

However, when I chased them, they then changed their mind and said that the probate valuation includes UK assets only.

Is it correct? The iht calculation included both the uk and foreign assets.

mybestattempt

I think that may be because while the value of the estate for IHT includes all worldwide assets (if the deceased was domiciled in the UK) the grant given in the UK only allows the administration of the estate for UK assets:

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm05011

You may already be aware where there are assets held overseas then you will need to follow the probate rules of the overseas jurisdiction to deal with those.

@poseidon1 is very knowledgeable and will probably be able to confirm or explain if/why my thoughts are wrong.

bikeman

When you apply for the grant you can order copies for international use so they must have a use. 

I do know that for bank accounts and other moveable assets (presumably shares), the law of wherever the deceased person resided (ie UK) when they died applies. 

poseidon1

bikeman said:

It's transpired that the asset value for probate has excluded foreign assets (shares). When I called hmrc I was told that this was incorrect and the probate code letter would be reissued.

However, when I chased them, they then changed their mind and said that the probate valuation includes UK assets only.

Is it correct? The iht calculation included both the uk and foreign assets.

Sounds odd to me.

 The only basis to omit asset values from probate value are those that constitute 'excluded property' for Inheritance Tax purposes. In those circumstances such assets are exempt from IHT because the deceased is considered non UK domiciled and therefore only liable to IHT on UK situs assets.

However, you have intimated that the IHT return was submitted not only  inclusive of the value of the  foreign shareholdings ( I assume these are paper certificated and not held on an investment platform), but the estate went on to pay IHT inclusive of the foreign share values. In which case the deceased would have had to have been UK domiciled ( as intimated by 'mybestattempt' in his post) for IHT to be properly chargeable thereon, and probate value should not have excluded their value.

I assume there is no question that the deceased was UK domiciled until death ( ie UK born and never changed his/her domicile of origin)?

This HMRC oversight  ( if that is what it is ) with the probate valuation should not of itself prevent the grant of probate being potentially used to transfer the foreign shareholdings to the executors in due course, assuming they are in certificated form.  Depending on the jurisdiction where the shares are listed the UK Grant can be 'resealed' in that country with the assistance of a foreign lawyer, but such jurisdictions will be limited to countries recognised by the UK Colonial Probates Acts ( Australia , New Zealand etc).

However, there are  many countries ( the USA being a very prominent example) where a UK grant of probate is not acceptable, cannot be resealed and  full-scale foreign grant of probate has to be obtained in that jurisdiction for those assets.

HMRC's handling ( or mishandling)  of probate, may be irritating but not fatal to your administration of the UK situs estate. However, depending on where  the jurisdiction/s of the foreign shareholdings are situated ( if certificated), you may have a whole other can of worms!

In summary,
* confirm the deceased's domicile ( for IHT purposes)
* confirm the countries where the shareholdings are listed, and whether held in certificated form.

bikeman

poseidon1 said:

In summary,
* confirm the deceased's domicile ( for IHT purposes)
* confirm the countries where the shareholdings are listed, and whether held in certificated form.

The share holdings are not paper certificated and are held on a US investment platform, Etrade. They were bought by the deceased through an employee share purchase plan when employed by a US company (pretty common I would have thought).
The deceased was a British citizen and domiciled in the UK.

My solicitor has confirmed that it was correct to pay IHT on all assets and the figure for probate correctly excludes foreign assets.

What is the procedure for dealing with non-certified share holdings? I had hoped that the platform would simply open accounts for the beneficiaries and transfer them across.

poseidon1

bikeman said:

poseidon1 said:

In summary,
* confirm the deceased's domicile ( for IHT purposes)
* confirm the countries where the shareholdings are listed, and whether held in certificated form.

The share holdings are not paper certificated and are held on a US investment platform, Etrade. They were bought by the deceased through an employee share purchase plan when employed by a US company (pretty common I would have thought).
The deceased was a British citizen and domiciled in the UK.

My solicitor has confirmed that it was correct to pay IHT on all assets and the figure for probate correctly excludes foreign assets.

What is the procedure for dealing with non-certified share holdings? I had hoped that the platform would simply open accounts for the beneficiaries and transfer them across.

Well the good news, is that since the shares were held on a US brokerage investment platform, rather than in paper form you won't need to concern yourself about the Medallion Signature Gurantee scheme ( Google it, its quite troublesome ) when eventually transferring the stock out of your father's name.

Bad news is that since neither your father or his heirs are American citizens or US resident, the estate will not qualify for the investment platform's usual process for the transfer of an investment account on death of the account holder.

As mentioned in my first post, the USA does not generally recognise UK probate as legal authority to transfer US shareholdings to UK persons ( there is  no recognition there of the Grant re-sealing process).

So if you have not already done so , you will need to contact Etrade's bereavement  division, notify them of the death and ask them to outline their procedure for opening an estate brokerage account for a deceased foreign account holder. 

One possible gleam of hope is you stated the shares were acquired via an employment related relationship. If so, Etrade just might hold a TOD ( transfer on death ) directive , naming the person's your father wanted his shareholdings to go to on death - see below a link to  Investopedia's article on this - so it may be worth asking Etrade if one is in exsistence.

https://www.investopedia.com/terms/t/transferondeath.asp

Now to be clear TODs still presuppose the transferees to be USA based, but the exsistence of one could potentially help in avoiding having to obtain fill blown US probate to facilitate the transfer of the  shares with all the  potential attendant legal costs that might entail.

In passing, if the shares pay dividends you may find 30% US  withholding tax will be deducted therefrom in future. This is because the  Form W - 8Ben your father signed to restrict tax to 15%, will likely have died with him.

Just because UK and USA share a common language (sort of!) it is wrong to assume that in these matters they share common procedural practices, often this is far from the case.

Finally, if you able to do so, it might be useful to update forumites with how you progress in this matter and whether you eventually sidestep the need for US probate. As you point out, it is not  exactly a rare occurrence for a UK citizen to hold shares on  a US brokerage account, so your experience might help others who find themselves in a similar situation.