Do I need to submit an Inheritance Tax return and if so, what type of return is required?

Q: My relative has recently passed away and I am the personal representative for their estate. Do I need to submit an Inheritance Tax return in order to pay off debts and distribute their estate? If so, what type of return is required? 

A: Unless you do not need to apply for a Grant of Representation in respect of the deceased’s estate, you will need to submit an Inheritance Tax return with your application for the Grant and pay any Inheritance Tax found to be due. This requirement applies whether or not the deceased left a valid Will or any tax is actually due. There are penalties for late submission of the form and interest will be charged on late payment of any Inheritance Tax due. 

If you have decided you should submit an Inheritance Tax form, there are three forms to consider: 

1. Form IHT205 - this applies where the deceased was UK domiciled at the time of death and there is no Inheritance Tax to pay as the value of the ‘gross estate’ (before deduction of debts) is below certain parameters, such as the ‘excepted estate’ value limit (or twice that limit for the estate of a surviving spouse/civil partner where the nil rate band can be transferred from the pre-deceased spouse/civil partner using form IHT217). This is usually the £325,000 nil rate band, or being below £1m in value and part or all of the estate passes to an exempt beneficiary such as a surviving spouse/civil partner, charity or other qualifying UK national body. Form IHT205 is submitted with the application for the Grant. 
2. Form IHT207 – this applies where the deceased was domiciled outside the UK but held assets in the UK consisting only of cash and/or quoted shares and stock only with a gross value of less than £150,000. Form IHT207 is submitted with the application for the Grant. 
3. Form IHT400 – This will apply in all other situations. As well as the main form there are numerous subsidiary supporting forms. Some forms require supporting information such as written valuations, a copy of the Will where there is one etc. Summary form IHT421 should also be completed. All forms are to be sent direct to the relevant HMRC office; form IHT421 will be certified by HMRC where everything is in order and send on to the relevant Probate Registry in support of the relevant grant application you have submitted. 

You may wish to seek professional assistance with areas of complexity when completing the forms. If you require such guidance or you wish to plan ahead during lifetime and aim to ensure the forms will be less complicated for your heirs, please contact me on 01865 292 200 or via email to arrange a complimentary one hour meeting.