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IHT400 and associated forms query (GWROB)
Donald Bedford
Posted: 30 May 2018 17:45:00(UTC)
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Hi

First post so please be gentle!

Trying to sort out my late mother's estate. She died in April this year (2018). Her estate is pretty straightforward (and could have been completed on-line) except for three small things which mean I have to complete a IHT400 form (plus all the associated schedules) and it is causing me no end of grief...

Her whole estate is less than the £325k inheritance tax threshold, so no inheritance tax to pay, but when I fill in the IHT400 pdf form to the best of my ability, it is telling me I will owe £8,400 inheritance tax which is clearly wrong. Whatever I do, I can't seem to make the form correct - so I am thinking that part(s) are either filled in (when they shouldn't be) or not filled in (when they should).

Three things mean that I have to fill in the IHT400.

1) She received a Widow's Pension from the company that my father used to work for (so I have to declare this on the IHT409??)

2) She had a small number of shares in three different companies - total holding amounts to less than £5k (so these shares have to be declared on the IHT 411??)

3) She originally purchased the house with us back in 1996 - her equity in the property at that time was 44%. She gifted her share to myself (sole beneficiary of her will) and my wife in August 2013 (which is less than 7 years ago) with a reservation of benefit (which means I have to complete an IHT403 form??)

Putting the values from these schedules (IHT403, IHT409 and IHT411) together with the small amount in her bank accounts (IHT406), a small amount of Household and Personal Goods (IHT407) and Life Assurance Policies (IHT410) is giving an inheritance tax liability (in box 119 the foot of page 12) as £8,400.

As her whole estate (her 44% share of the house at today's market value, plus the amounts in her bank accounts, the value of her shares and her personal possessions) totals around £240,000, so the inheritance tax figure of £8,400 is obviously wrong - but I don't know where the mistake/s in the IHT 400 is/are.

For such a simple estate, I am loathe to fork out around £2k to pay a solicitor to sort this out but smart as I am, filling in this blasted form is leaving me with a desire to commit suicide.

Any help gratefully received,

Thanks in advance,

Don
Frank Wright
Posted: 31 May 2018 09:28:24(UTC)
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I suggest you phone up the IR and ask for their help. I filled in this form (and its various addenda) for my late father and found the help line useful in resolving my questions relating to property, shares and gifts.

Contrary to what we might think, I find that the IR phone lines are good at giving help on a range of tax related topics, especially to those like yourself who like to fill them in without professional help.

Incidentally, I note that you mention your late father. Is there any IHT allowance from him to transfer? If the value of his estate that was passed onto those other than his wife was less that the IHT rate in effect at the time of his death, then you can add that proportion to your mother's IHT allowance.
2 users thanked Frank Wright for this post.
Tim D on 31/05/2018(UTC), Donald Bedford on 03/06/2018(UTC)
Jon Snow
Posted: 31 May 2018 16:26:39(UTC)
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Just my opinion and what my accountant has done.

I'm in a very similar situation sorting out my wifes fathers estate, he died in April 2018. I use an accountant and I passed all the asset information to him and the estate is less that the IHT nil rate band. He also had a few shares and a company pension scheme.

All my accountant has sent for us to sign is an IHT 205 and PA1 (which we don't actually need to sign).

IHT 205 - https://www.gov.uk/gover...information-iht205-2011

So, based on what you state, I don't see that you need to complete an IHT 400 form as that is for situations where -

"Inheritance Tax is due - or a full account is required"

The only fly in the ointment may be the property gift/transfer. how it is documented if your mother continued to live in it.
Donald Bedford
Posted: 31 May 2018 16:37:10(UTC)
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Thank you for your reply Frank.

I have rung the HMRC IHT helpline on numerous occasions only to be directed back to the web for help(!) It so happens that today I managed to get to speak to a human and they gave some advice and then voluntarily offered that I could mark YES to box IHT400 29a (to gain an extra £100,000 of relief) and I could also transfer any of my late father's unused relief to my mother - box IHT400 29c - potentially taking my mothers IHT allowance to around £700k.

As the whole of her estate is likely to be under £250k (well short of the current nil rate threshold of £325k, I don't see the need to do this. His statements (whilst trying to be helpful) threw me off somewhat.

Also, there were several questions that I asked where his reply was something like "Oh, we're not interested in that" e.g. IHT400 box 36 (schedule IHT409) and the paid-up insurance policy she had to contribute towards funeral costs.

There are several boxes/questions on the IHT403 that I don't know the answer to.

In 1996, my mother sold her house after my father died shortly before, we sold our house, pooled the money and bought a house in joint names (my wife, my mother and myself all on the deeds). Her monetary contribution amounted to 44%. In August 2013, she made a gift of her part of the house (44%) to us and had her name taken off the deeds. A 'Declaration of Trust' was made at the same time in which it was stipulated that the gift was dependent on her continuing to live with us at the house (which she did until she died in April this year) and that the house could not be sold without her agreement.

Given the above, I don't know whether to fill in IHT403 box 7 (page 2), IHT403 boxes 8,9,10 and 12 (page 3) and/or IHT403 boxes 13-16 (page 4). I am pretty sure that it should only be page 3 where I fill anything in as the gift was with a 'Reservation of Benefit' - otherwise known as GWROB.

I basically need someone to guide me through the following forms so that I can fill in the IHT400 correctly (schedule 403, 406, 407, 409, 410 and 411).

I'm not stupid but these forms aren't at all easy to fill in and I'm concerned that I may complete them incorrectly as I am aware of stiff penalties for misrepresenting the details.

Kind regards,

Don
Donald Bedford
Posted: 31 May 2018 16:46:19(UTC)
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Hi Jon,

Thank you for your reply.

I started filling out the IHT205 as I knew that my mother's estate wouldn't be liable for IHT and was relatively straightforward (or so I thought)..

On page 1 of the IHT205 form, box 2, it says "In the 7 years before they died, did the deceased make any gifts or other transfers more than £3,000 per year?" - the answer being 'yes'. It also says "If you answered 'Yes' (and the value is more than £150,000), stop filling in this form and complete IHT400 instead".

Sadly, it looks like I can't fill in the much simpler IHT205 and have to wade through treacle filling in the IHT400 and all the associated forms (which seem to vary between an additional five to something like nine or ten each time I have a new go at the form).

Any help/advice gladly welcomed.

Kind regards,

Don
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Jon Snow on 31/05/2018(UTC)
Law Man
Posted: 01 June 2018 14:54:21(UTC)
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Don: I appreciate your desire to keep costs down, but consider the costs of getting it wrong and the cost of your time.

It is not my field, but I suspect the whole value of the house may be taxable, given the deceased continued to live in it. That may account for a higher estate figure.

Given that, use of (1) inheritance of the pre-deceased husband's nil rate band and (2) the property nil rate band (applicable if the beneficiaries are children or grandchildren) may get you home without tax.

I have no idea how to complete a IHT form.
Donald Bedford
Posted: 01 June 2018 19:30:15(UTC)
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Law Man;63254 wrote:
Don: I appreciate your desire to keep costs down, but consider the costs of getting it wrong and the cost of your time.

It is not my field, but I suspect the whole value of the house may be taxable, given the deceased continued to live in it. That may account for a higher estate figure.

Nope. Why would our 56% share of the house be taxable? The house was both our home (mine and my wife's) and also my mother's home too. Inheritance tax is payable on the estate of the deceased (if over the £323k threshold) and my mother only owned part of her home, not all of it. I know HMRC would tax daylight and oxygen if they could, but they can't make me pay inheritance tax on something that I paid for myself and didn't inherit!

She gifted her portion of the house (44%) to us in Q3 2013 and this is called a "Gift with a Reservation of Benefit" as she continued to live in the house (thus deriving benefit) even though she had gifted us her equitable interest in the house in 2013.

This gift would be liable for IHT if (a) it was large enough and (b) made recently (within the last 7 years). Beyond 7 years, it is ignored for IHT purposes. The amount of IHT payable is on a sliding scale - called 'Tapered Relief' and as Q3 2013 is between 4 and 5 years ago, it reduces the IHT percentage (if payable) from 40% to 24% [between 5 and 6 years it is reduced to 16% and between 6 and 7 years to 8%. Above 7 years, it is zero].

Law Man;63254 wrote:
Given that, use of (1) inheritance of the pre-deceased husband's nil rate band and (2) the property nil rate band (applicable if the beneficiaries are children or grandchildren) may get you home without tax.

Again, no - there is simply no need.

The whole of my mother's estate is far less than the £325,000 threshold for IHT purposes - actually around 2/3 - so as I said in my post (#4 this thread), there is simply no need to use these extra allowances. Personally, given the complexity of the IHT400 form and the associated schedules, I don't see the need to further complicate matters by adding to the number of forms I have to fill in when there is aboluely no need. As it stands my liability for IHT on my mother's estate is nil - it is only that the IHT400 form is so complicated and I haven't filled it in correctly that the figure keeps coming out wrong.

Interestingly my wife contacted Which? Legal this afternoon asking if they could help with the completioin of the IHT400 and their reply was essentially "we don't touch those - they're far too complicated!"

Further to the above, my wife used the on-line IHT400 calculator today using the figures we had put in our latest version of the IHT400 and it said zero tax to pay - so maybe we've kind of got it right now.

When you go to swear the oath at the probate office, they check the form anyway, so I guess they'll flag it up there if anything is amiss.

Regards

Don
Frank Wright
Posted: 01 June 2018 22:29:32(UTC)
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I don't recall much checking of the IHT400 tax form when I swore my oath - in and out in about 5 minutes. Probably checked it was signed and dated, not much more.
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Jon Snow on 01/06/2018(UTC)
Jon Snow
Posted: 01 June 2018 23:34:44(UTC)
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I think a decent local accountant could steer you through this process, for a few hundred pounds, get him/her to act as your agent.

You may even be able to submit just the IHT 205 form.

Her Majesty's finest are looking for bigger fish.
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Donald Bedford on 03/06/2018(UTC)
Donald Bedford
Posted: 03 June 2018 08:48:24(UTC)
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Frank Wright;63276 wrote:
I don't recall much checking of the IHT400 tax form when I swore my oath - in and out in about 5 minutes. Probably checked it was signed and dated, not much more.

That's probably what will happen thinking about it. Maybe I ought to ask them to have a quick look and flash them my cheeky smile :D

Jon Snow;63278 wrote:
I think a decent local accountant could steer you through this process, for a few hundred pounds, get him/her to act as your agent.

You may even be able to submit just the IHT 205 form.

That's not a bad idea Jon. Iv'e heard a couple of people say that they can submit the 205 (even when it looks like you have to do a 400) as they have "other channels" not available to Joe Public.

Quote:
Her Majesty's finest are looking for bigger fish.

That's probably true - unless they have targets for checking the sprats too!

Thanks for your help/ideas/thoughts guys, much appreciated!

Don
jeffian
Posted: 03 June 2018 11:55:14(UTC)
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Don,

You say that completing the online form results in a calculation of £8400 IHT payable. Working backwards, that tells you that it values your mother's net estate at £346,000 vs. your estimate of £240,000. There seem to be very few 'inputs' to your figure, so is it not possible to see where the discrepancy arises?

Like others, I have a feeling that it will relate to the house. Do remember that the Probate Value is the value at the date of death, not the value at the date of gift with reservation of benefit.
Donald Bedford
Posted: 03 June 2018 16:14:26(UTC)
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jeffian wrote:
Don,

You say that completing the online form results in a calculation of £8400 IHT payable. Working backwards, that tells you that it values your mother's net estate at £346,000 vs. your estimate of £240,000. There seem to be very few 'inputs' to your figure, so is it not possible to see where the discrepancy arises?

I hear what you are saying, but even the house at its maximum value around a year ago, my mother's estate still doesn't come anywhere close to the IHT threshold of £325k - so I know that i have entered something in the wrong place or entered something twice or some such.

It is the fact that on the surface, my mother's estate is quite simple, that means that I know that no IHT is payable. It is just a matter of filling in the forms correctly to show that.

If it wasn't for her gift of her equity in the house in 2013 and the fact that she has a few shares, I could fill in the IHT205 and be much, much happier.

jeffian wrote:
Like others, I have a feeling that it will relate to the house. Do remember that the Probate Value is the value at the date of death, not the value at the date of gift with reservation of benefit.

Yes thanks, I'm aware of that and I'm using the 2018 figure - although one of the forms (I can't remember which one - there are so many) wanted the value of the gift at the time it was made (Q3 2013). We had the house valued in Q3 2015 so I am using that as a 'datum figure' in order to calculate the 2013 and 2018 values using the Nationwide calculator. Incidentally, Zoopla also agrees (to within around £400) on the historical value for Q3 2013.

Don
jeffian
Posted: 03 June 2018 22:13:31(UTC)
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So can you work out how the aggregate amount of the assets you have declared come to £346,000 instead of the £240,000 you say they are worth?
Mr J
Posted: 04 June 2018 00:22:15(UTC)
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https://www.gov.uk/hmrc-...ce-tax-manual/ihtm04071

I think if you don’t understand the forms and you can’t work out how they are calculating any tax due then you should be employing someone who does and can.

I very much doubt that zoopla is going to be seen as an acceptable source of property valuations for IHT purposes (if IHT is due) by HMRC. A professional valuation report would normally be expected and may still be challenged by the district valuer.

Donald Bedford
Posted: 04 June 2018 07:54:39(UTC)
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jeffian;63325 wrote:
So can you work out how the aggregate amount of the assets you have declared come to £346,000 instead of the £240,000 you say they are worth?

In short, No.

The figure of £8,400 IHT liability was my first attempt at the IHT 400 - and when I got that figure, I knew it was wrong. My second go produced a different figure (can't remember whether higher or lower) and my third attempt produced a negative figure (!). These were all using a pdf which automatically gave me the IHT figure. Obviously there were mistakes in the form.

Two more attempts (not to mention several highly stressed hours later) and the form now says zero IHT to pay - so I'm thinking it is either right or very nearly so, however, I'm going to get a professional of some sort to run over the figures & form to check.

Mr J;63328 wrote:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04071

I think if you don’t understand the forms and you can’t work out how they are calculating any tax due then you should be employing someone who does and can.

I very much doubt that zoopla is going to be seen as an acceptable source of property valuations for IHT purposes (if IHT is due) by HMRC. A professional valuation report would normally be expected and may still be challenged by the district valuer.


I would agree - if the estate is heading towards the £325k threshold. As her part of the house was/is worth around £200k, I don't think they'll look to carefully. The figure is reasonably accurate and not a 'shot in the dark' guesstimate.

Both Zoopla and Nationwide House Price Calculator aren't that accurate - but when we had the house valued back in Q3 2015, the three professional valuers that came found valued the house with a spread of around £50k - so they are not entirely accurate either.

I'm loathe to spend unnecessary money to prove that there is no IHT to pay on an estate worth in total around £240k. Sure, I'll have to spend some to get a professional check the forms but why pay to get the house re-valued just for HMRC purposes?

After all, this is why I'm filling the form in myself rather than passing it over to my solicitor who has already told me they will charge around £2k plus the court fee to arrange probate.

Thanks for the replies/help/suggestions offered. It is appreciated.

Don
jeffian
Posted: 04 June 2018 09:29:39(UTC)
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Don,

"jeffian;63325 wrote:
So can you work out how the aggregate amount of the assets you have declared come to £346,000 instead of the £240,000 you say they are worth?

In short, No."

If in doubt, always safer to get professional advice, but I still don't understand why it is proving so difficult to reconcile your figures. My Old Mum died in April 2016 and I've just dug out her IHT400. There are various boxes into which you put the value of the deceased's assets - which you say in your mother's case were quite limited anyway - and at Box 79 these are all totted up to produce "Gross total of the estate in the UK". You think this should be £240,000 but to generate in IHT bill of £8400, the online calculator must make this £346,000 (ignoring any deductible expenses) - a difference of £106,000. Surely a manual calculation should highlight where the discrepancy arises?
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