Inheritance Tax – Commons Library briefing – UK Parliament

Source: Inheritance Tax – Commons Library briefing – UK Parliament


So…  why the briefing?  Have they actually got time to tinker with the IHT system with Brexit going on?


Families are warned about the Budget stealth tax | Daily Mail Online

Source: Families are warned about the Budget stealth tax | Daily Mail Online


I am not a Daily Mail reader, as a general rule – nor a supporter of Rees-Mogg.


But the new probate fees will cost many ordinary people a lot of hurt, and I think they are just not aware of the changes.  The consultation on the rise in fees was met with an overwhelming about of negative feedback, but was totally ignored.

The statement that there will be many estates lifted out of the need for getting a grant of probate by this measure verges on the disingenuous – most estates with a value of less than £50,000 do not pay for a grant of probate: in most cases, banks and building societies are prepared to give money to the executors of an estate with almost distressingly little checking – it seems easier to get money out of an account for a deceased person than it is to register a power of attorney.

The problem is that it affects people who would not have expected to pay inheritance tax, and who might have simple wills or not even thought about their wills for a long time – those people leaving everything to their spouse, or to charity, on the basis that there was no tax to pay so there was no need to do anything really.  The introduction of the Transferrable Nil Rate Band and the Transferrable Residential Nil Rate Band have done a lot to perpetuate this theory – that unless you have over £650,000 (or now on a sliding scale up to £1 million for deaths occurring in 2020 onwards) you can leave all you have to a spouse with no worries.

But not now – not only do the smallest estates pay almost double the original fee of £155 (starting at £300), but those “ordinary families” with houses and a few savings (coming to, say £550K, will be caught.

Woe betide those who have no cash, but everything in investments.  Or those with most of the money tied up in the farm or in a business when they die – somehow, money has to be found.  The maximum fee of £20,000 just for assets to pass between spouses is eyewatering, to say the least.

There’s a petition, and of course, you can write to your MP to protest – unless there is a protest of some description, these fees will come in from as early as 1 May.  To say that everyone is on hold to the Inland Revenue to get their forms pushed through ASAP is an understatement – the probate registry has sent out three information notices already on the subject to the tune of “don’t panic Mr Mannering!”

Day -v- Harris [2013], Curnock v IRC, Phizackerley

Just a quick reminder to myself that these are the current cases concerned the ability of attorneys to make valid gifts, and the interaction with IHT.

Day -v- Harris 2013 Day v Harris and others Same v Royal College of Music and another (Arnold and another, interpleader claimants) [2013] EWCA Civ 191; [2013] WLR (D) 112 and PDF of judgment concerns a registered EPA – and gifts made by the attorney (who was also a joint holder of a bank account) and whether the gifts that he had made were as attorney for the donor, or in another capacity as being access to the joint bank account as was his right as a joint bank account signatory

In my judgment, it remained open to Mr Day to operate the bank account after registration of the EPA as he had done before such registration. He could not use it to benefit himself without the full, free and informed consent of Sir Malcolm but, if he had that consent, as the judge held he did, gifts made by drawing cheques on the joint account were not invalidated by the effect of section 7(1)(c) of the Act even though made after registration of the EPA.

Had the gifts not been validly made, then they were still part of the donor’s estate for IHT purposes – on the basis of Curnock v IRC, Curnock v IRC [2003] SWTI 1053 where a cheque was not encashed prior to the death of the donor – and therefore the gift was not complete by the time of death.  This could also be seen in conjunction with Phizackerley, Personal Representatives of Phizackerley v HMRC [2007] SpC 591

An earlier version of Day -v- Harris, in 2010 concerned the nature of the accounting to be made for the researches of the executor into the amount of the gifts that were made and how far back the executor should go in attempting to ascertain what gifts had been made, and whether the expenses of the executor in doing so were reasonable.

Residential Nil Rate Band – downsizing calculations

PDF The draft clauses dealing with the downsizing element of the new RNRB are out today.

The RNRB is available from 6 April 2017 and the relief for downsizing or disposals will apply for deaths after that date where the disposal occurred on or after 8 July 2015.

So, working out, with the aid of a cold towel, what the calculations might actually mean is going to be important – particularly if this is potentially an area where not only the estate planning department need to know what they are talking about, but need to find a way of recording the information through the conveyancing department for most residential property sales that took place since the summer, where it is anticipated that the clients have a total estate value exceeding £650,000 (or £325,000 for non married persons).

I hope Professor Lesley King will do another talk with worked examples – that would help.