A word of warning for diligent executors!
The wording on the Inheritance Tax claim form IHT436 may lead executors to underclaim relief for the transfer any unused residence nil rate band, or RNRB, on inheritance tax returns …. and it should be taken as read that HMRC will not necessarily correct that error.
What is the issue?
A claim to transfer unused RNRB can be made if the deceased is claiming the inheritance tax residence nil rate band and had a spouse or civil partner that died before them, and that spouse or civil partner either died before 6 April 2017, or died after that date without having used all of the RNRB available to them.
Details of the former spouse or civil partner on are entered in boxes 11 to 15 of the IHT436 as executors work out how much if any, ‘residential enhancement’ is available following the first death.
Box 14 requires the value of the residential enhancement for the person whose estate you are dealing with now. Box 14 appears to be a box that some executors are not completing correctly.
The box should show the Residential Enhancement at the date of the second death, NOT the amount at the first death (which is shown in box 11).
What is the correct position?
The very helpful notes to IHT 436 found on page 3 show the amounts to be claimed in Box 14. For example, if the second death was after 2020, the amount is £175,000, even if the first death was prior to 2019/20:
The amount of the claim is called the ‘Residential Enhancement’:
• £100,000 to 5 April 2018.
• £125,000 in 2018 to 2019.
• £150,000 in 2019 to 2020.
• £175,000 in 2020 to 2026.
Where the spouse or civil partner’s death occurred before 6 April 2017, the Residential Enhancement at that time is deemed to have been £100,000.
Correcting an underclaim
Errors such as this on inheritance tax returns can swiftly be corrected by writing to HMRC. Have a good look at the relevant inheritance tax form by clicking on the link below: