The new IHT400 Inheritance Tax account
10/09/2009
Janet Blow, Head of customer service in HMRC, HM Revenue & Customs
The new IHT400 Inheritance Tax account
Delivery of an IHT400 instead of the IHT200 became compulsory on 9 June 2009 for all deaths on or after 18 March 1986 where a full IHT account is required.
The IHT400 suite of forms follows a similar format to the IHT200 and consists of a main account and schedules numbered IHT401 to IHT423 to replace forms D1 to D22 and other IHT forms and guidance.
The table below lists all the new forms and guidance and links them to the old IHT200 suite of forms.
List of IHT400 schedules and corresponding forms
|
Form number
|
Form title
|
Previous form
|
|
|
|
Number
|
|
|
|
|
|
IHT400
|
Inheritance Tax Account IHT400
|
IHT200
|
|
IHT400 Calculation
|
Inheritance Tax Account IHT400 Calculation
|
IHT200(WS)
|
|
IHT401
|
Domicile outside the United Kingdom
|
D2
|
|
IHT402
|
Claim to transfer unused Inheritance Tax nil rate band
|
IHT216
|
|
IHT403
|
Gifts and other transfers of value
|
D3
|
|
IHT404
|
Jointly owned assets
|
D4
|
|
IHT405
|
Houses, land, buildings and interests in land
|
D12
|
|
IHT406
|
Bank and building society accounts
|
New form
|
|
IHT407
|
Household and personal goods
|
D10
|
|
IHT408
|
Household and personal goods given to charity
|
D10A
|
|
IHT409
|
Pensions
|
D6
|
|
IHT410
|
Life assurance and annuities
|
D9
|
|
IHT411
|
Listed stocks and shares
|
D7
|
|
IHT412
|
Unlisted stocks and shares and control holdings
|
New form
|
|
IHT413
|
Business or partnership interests and assets
|
D14
|
|
IHT414
|
Agricultural relief
|
D13
|
|
IHT415
|
Interest in another estate
|
D11
|
|
IHT416
|
Debts due to the deceased
|
D8
|
|
IHT417
|
Foreign assets
|
D15
|
|
IHT418
|
Assets held in trust
|
D5
|
|
IHT419
|
Debts owed by the deceased
|
D16
|
|
IHT420
|
National Heritage assets, conditional exemption and offers in lieu of tax
|
New
|
|
IHT421
|
Probate summary
|
D18
|
|
IHT422
|
Application for an Inheritance Tax reference
|
D21
|
|
IHT423
|
Direct payment scheme bank or building society account
|
D20
|
|
IHT400 Letter
|
Inheritance Tax forms Quick start guide
|
New –print only
|
|
IHT400 Rates & Tables
|
Inheritance Tax nil rate bands, limits and rates
|
IHT210A
|
|
IHT400 Notes
|
Guide to completing your Inheritance Tax account
|
IHT210
|
|
IHT400 Helpsheet
|
Inheritance Tax Account IHT400 Interest Helpsheet
|
New
|
|
|
Deleted form
|
D1
|
|
|
Deleted form
|
D17
|
|
|
Deleted form
|
D3a
|
Main changes in the IHT400
Looking at what has changed with the introduction of the IHT400.
Deleted schedules
Form D1 (The Will)
As a copy of the Will is required in all cases where there was one, the questions which used to appear on the form D1 have been incorporated into the main account IHT400
.
Form D17 (Additional information)
This has been replaced with a new schedule IHT406 for listing bank and building society accounts and National Savings Investments. Additional information space is now on pages 15 and 16 of form IHT400.
Form D3a (Gifts made as part of normal expenditure out of income)
This now forms the last page of schedule IHT403 Gifts and other transfers of value.
New schedules
The following new schedules have been introduced:
IHT406 Bank and building society accounts and National Savings Investments
IHT412 Unlisted stocks and shares, and control holdings
IHT420 National Heritage assets, conditional exemption and offers in lieu of tax
These schedules have been introduced in response to feedback from Agents and personal applicants.
Other major changes
Instalment and non-instalment option property
Pages 6 to 10 of form IHT400 are divided into two columns, column A for non-instalment option property and column B for instalment option property. This is so the deceased’s assets can be listed in a logical order with joint assets first, followed by the most common assets of house, bank accounts, cash, and so on.
Each asset can only be put into one box, with the exception of traded unlisted and unlisted shares which should be put in box 65 unless they (unusually) qualify for instalments, when they should be put in box 66.
Jointly owned assets
The deceased’s share of jointly owned assets should be listed on schedule IHT404. It does not matter for the purposes of the IHT calculation whether they are held as tenants in common or joint tenants. Box 49 form IHT400 is for the net value of the deceased’s share of jointly owned instalment option property (copied from box 5, form IHT404) and box 50 form IHT400 is for the net value of the deceased’s share of jointly owned non-instalment option property (copied from box 10, form IHT404).
The probate value of the deceased’s estate does not include jointly owned assets passing by survivorship and this is dealt with by listing such assets in box 11, form IHT404. The total is then deducted from the probate summary, form IHT421.
Transfer of unused nil rate band
The claim form for claiming a transfer of unused nil rate band, form IHT402 is now a schedule to the IHT400 and the declaration on page 12 of the IHT400 includes a clause relating to the claim, if one has been made.
The number of documents which HMRC needs to see with the IHT402 has been reduced to photocopies of the following:
- Grant of representation (or Confirmation) to the estate of the first spouse or civil partner. If no grant was taken out, a copy of the death certificate.
- Spouse or civil partner’s Will, if there was one.
- Deed of variation or similar document, if one was executed on the first estate.
Household and personal goods
HMRC has reduced the amount of detail they require for most household and personal goods on form IHT407. The only household and personal goods that need to be listed individually are:
- items of jewellery valued at over £500
- vehicles, boats and aircraft
- antiques, works of art or collections
All other household and personal goods such as general furniture, white goods, and jewellery valued at less than £500 should be totalled up and the total value of such items entered at box 4 form IHT407.
Stocks and shares – schedules IHT411 and IHT412
There are now two schedules for stocks and shares:
- IHT411 for listed stocks and shares, including UK Government and municipal securities
- IHT412 for unlisted, traded unlisted and control holdings of stocks and shares.
If business relief is being deducted from qualifying holdings of unlisted, traded unlisted and control holdings of stocks and shares, this should be shown on schedule IHT412 and not on schedule IHT413 Business and partnership interests and assets.
Questions on the schedules IHT401 to IHT419
The new schedules appear to ask more questions than the old ‘D’ forms. This is because most of the ‘D’ notes have been amalgamated with the schedules to make it easier to identify the information required. Where there are additional notes they can be found in the IHT 400 notes booklet on pages 18 to 42.
Calculating the Inheritance Tax
All the notes for the IHT400 calculation are on the form except for an explanation of how to calculate interest on payments of Inheritance Tax, which can be found on the IHT400 Helpsheet.
Interest calculator
An Inheritance Tax interest calculator is now on the HMRC website to assist with the calculation of interest on payments of Inheritance Tax. This can be found at;
www.hmrc.gov.uk/tools/inheritancetax/interest-rate-calculator.htm. Simply enter the start and end dates and the amount of tax and the calculation will be done for you.
Submitting a full and accurate form IHT400
Submitting a full and accurate form IHT400 that HMRC can accept at the time it is delivered helps to minimise the amount of work needed for both the practitioner and HMRC. There may be more tax to pay if the instalment option has been taken, but if there are no enquiries raised into the return, a correct return helps to speed up the administration of an estate and keep costs down for both sides.
The following areas are the ones where HMRC most frequently have to ask for additional information;
Wills – please ensure that where a will exists a copy is submitted with every IHT400.
IHT 403 Gifts – If the deceased retained any interest in gifted property, or the gift was made to trustees, these must be listed on the IHT 403.
IHT 404 Jointly Owned Assets – This can be a complex area so clear information about the history of the joint asset and who has benefited from it essential.
IHT 405 Houses, land, buildings and interests in land – Ensure valuers provide an open market value for the property not a probate value.
IHT 407 Household and Personal Goods – Again it is vital that an open market value is given. If the deceased had a large collection of items, such as antiques, attach additional sheets to the IHT 407 as appropriate.
IHT 408 – This has been designed for use as an instrument of variation to cover items given to charity, not specified in the will, that have a commercial value. Although most people do not expect to pay Inheritance Tax on charitable donations, unless an IOV is executed they are strictly required to do so.
IHT 409 Pensions – This form aims to highlight the 4 most common claims, covered in a little more detail below, that can arise with pensions and also covers the chargeable events which now arise due to the changes in the rules for members of registered pensions schemes from 6 April 2006 and the IHT legislation in the Finance Act of 2006 regarding the IHT treatment of alternatively secured pensions.
- Guaranteed payments. All elements of the guaranteed payments are an asset of the estate and need to be included on the IHT 409, even if the deceased has died before the guaranteed period expires, as the estate will continue to receive the balance of the payments. HMRC has a calculator on the IHT internet pages to help calculate the value of the right to receive payments under the guarantee after the deceased has died.
- This can be found at: http://www.hmrc.gov.uk/cto/forms/g_annuity.pdf
- Lump sum payments – In some circumstances, for example a single person who dies without a will or any children, even though the policy rules may have given the policy trustees the discretion to make a payment, that discretion may not in reality exist and the lump sum may be part of the estate. It is important to look at the deceased’s personal circumstances and not assume that the pension provider is correct in their assumption that the lump sum is not part of the estate.
- Disposals and changes within 2 years of death – If the deceased has altered their pension provision to shift value between the pension benefit and death benefit there may be as substantial transfer of value during their lifetime, especially if this was made whilst they were in poor health. The most important thing is to flag this up on the return, HMRC will have to investigate this further and discuss values with you once the grant has been obtained,
- Contributions to pension scheme whilst in poor health – A claim can arise where there are contributions to an employer’s pension scheme made on behalf of an employee (the deceased) when they were in ill health. This is particularly relevant if the contributions increase substantially in the two years before death – the increased contributions may be transfers of value.
- Alternatively secured pensions - Pages 3 and 4 of form IHT409 cover the occasions when an alternatively secured pension fund or left-over pension funds in the hands of beneficiaries are chargeable to IHT.
IHT 414 Agricultural Relief – Provide as much information as possible about the agricultural activity being carried out. Explain to what uses building were put and the purpose for which all residential property on the farm was occupied, Comments such as ‘general farming’ and ‘grazing’ are not sufficient to explain the extent of the agricultural activity. Providing information about what crops were grown and/or what animals were raised gives a much better picture as well as describing the role the person concerned played on the farm. It is also worth including a plan of the farmland when submitting the IHT 400 as this can be used to identify and land or buildings that do not qualify for relief.