Tony Wickenden: FAQs on the transferable nil-rate band

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Following my recent articles on the transferable nil rate band, I thought it might be helpful to set out a few FAQs around the fundamentals, drawing on HM Revenue & Customs guidance.

Does it matter when the deaths occurred?

Yes. It applies where the surviving spouse or civil partner died on or after 9 October 2007. But it does not matter how long before them their spouse or civil partner died.

If I inherited all the assets from my spouse or civil partner, could my executors add their nil rate band to that which applies when I die?

Essentially, yes. But it works by looking at what proportion of the nil rate band was unused when your spouse or civil partner died and uprating the nil rate band available when you die by that same proportion.

So if your spouse or civil partner left assets worth £162,500 to your children with everything else to you, and the nil rate band on their death was £325,000, one half of their nil rate band is unused and available for transfer.

If, when you die, the nil rate band had increased to, say, £350,000, the amount available for transfer would be 50 per cent of that (£175,000) giving your estate a nil rate band of £350,000 + £175,000, or £525,000 in total.

What if my spouse or civil partner’s estate was only worth £100,000, so they did not need all of their nil rate band? Is the amount that can be transferred tied to the amount they actually left to me?

No. It does not matter what the size of the first estate was; whatever proportion of the nil rate band is unused may be transferred to you. If your spouse or civil partner’s estate was worth only £100,000 and they left everything to you, they will not have used any part of their nil rate band. So 100 per cent is available for transfer when you die.

What about any gifts my spouse or civil partner may have made in the seven years before they died, or any other assets that were chargeable when they died?

Gifts and any other assets chargeable on the first death (for example, assets in trust or assets owned jointly with a son or daughter) eat into the nil rate band in the normal way, reducing the amount that may be available for transfer.

I want to leave all my estate to my spouse or civil partner but between us our estates do not exceed one nil rate band. What should I do?

On your death your executors should still work out how much of your nil rate band is available for transfer as the circumstances of your spouse or civil partner may change before they die. But if, when they die, their estate remains below a single nil rate band (and provided they have not remarried or entered into a new civil partnership) there is no need for their personal representatives to make a claim to transfer unused nil rate band.

How is the transfer made?

When the surviving spouse or civil partner dies, their personal representatives will make a claim to transfer the unused nil rate band available from the first death. They will need to fill in a claim form and provide certain documents:

  • The death certificate for the first person to die
  • The marriage certificate or civil partnership certificate for the couple
  • A copy of the spouse or civil partner’s will, if they left one
  • A copy of the grant of probate/confirmation
  • A copy of a deed of variation or other similar document executed to change the people who inherited the estate of the spouse or civil partner, if they left one

The personal representatives should send the claim form and supporting documents to HMRC when they send in form IHT400 on the death of the surviving spouse or civil partner.

We did not know about the need to keep records when the first person died and we do not have papers relating to that death. How can we make a claim?

The personal representatives will be able to obtain copies of some of the documents you need from public record bodies:

  • Copies of a grants of representation or confirmation and copies of wills are available from the Court Service (for England & Wales, hmcourts-service.gov.uk, for Scotland www.scotcourts.gov.uk and for Northern Ireland www.courtsni.gov.uk).
  • Copies of death certificates and marriage certificates are available from the General Register Office.

These will give you the value of the first estate declared for probate/confirmation and will also provide information about who inherited the assets that passed under the deceased’s will or intestacy. However, it will not provide any information about other assets chargeable when someone dies.

The personal representatives will need to make enquiries of those who inherited the first estate to see if they can recall whether or not there may have been other assets chargeable on the first death. If values are known, they should be included on the claim form. If values are not known, the personal representatives should complete the claim form to the best of their ability and explain the position to HMRC.

If there is no evidence any other assets were chargeable, the personal representatives can make their claim based on the information they have from the documents already mentioned.

Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn