IHT - transfer of residence nil rate band

MK62

While doing a bit of digging into this, specifically around the transfer of RNRB between married couples where the first death was prior to the introduction of RNRB in 2017, I came across this here .....
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46040
In one paragraph it states....

The brought-forward allowance is calculated by reference to the unused percentage of the residential enhancement on the earlier death. Where that earlier death occurred before 6 April 2017 the residential enhancement at that time is deemed to have been £100,000.

.....which is as I understood it to apply, but then further down the page it states in another paragraph...

For deaths before 6 April 2017, as there was no RNRB at that time, none can have been used. The brought-forward amount will be 100% of the residential enhancement in force at the later death of the surviving spouse or civil partner.

......which, unless I'm reading it wrongly, seems to contradict the earlier paragraph.....

Both statements can't be true, so thought I'd ask on here to perhaps save a lot of digging online......is my understanding correct and the first statement is the current situation, or is it in fact the case that the second statement is the actual situation here?

Thanks in advance....

SnowMan

I think they are saying the same thing but the first bit is worded a little clumsily (perhaps it's to do with how the legislation is worded) because the notional residential enhancement amount at first death is irrelevant because only the % carried forward matters.

The first bit is saying the residential enhancement at first death is 100,000. But because it can't have been used then 100,000 of that 100,000 residential enhancement hasn't been used i.e 100% hasn't been used. It could have been 125,000 of 125,000 or 50,000 of 50,000 (but they probably just picked the rate at introduction even though it's irrelevant). And so 100% is the percentage carried forward to the second (post 2017) death where it is applied to the residential enhancement figure at second death.

Just my reading of it.

MK62

Thanks, that sounds feasible tbh.........so it's the unused percentage that carries forward rather than the unused amount?......tbh on rereading it yet again after your post, it does actually say that in the first paragraph, but I think I had tax blurb blindness.....

SnowMan

MK62 said:

Thanks, that sounds feasible tbh.........so it's the unused percentage that carries forward rather than the unused amount?......tbh on rereading it yet again after your post, it does actually say that in the first paragraph, but I think I had tax blurb blindness.....

Yes that's how I understand it. It's the percentage that carries forward. It's explained here, and the example is just your scenario

https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

A man died in 2015 and left his entire estate of £600,000 to his wife. This was before the residence nil rate band was available, so 100% is available to transfer to his wife’s estate. His wife dies on 30 July 2019 and leaves all her estate, including a home worth £400,000 to her daughter. When she dies in the tax year 2019 to 2020, the maximum available residence nil rate band is £150,000. Her executor makes a claim to transfer the unused residence nil rate band from her husband’s estate. So the total available residence nil rate band for his wife’s estate will be £300,000 (£150,000 + (transfer of 100% x £150,000)).