Transferring an IHT advantage

Married couples can transfer their Inheritance Tax nil-rate bands (NRBs) between each other, but you’ll have to convince HMRC that you qualify. What proof does it require?

IHT recap

It’s common for people to leave all their assets to their spouse or civil partner when they die. This used to mean that any unused part of their NRB (this allows the first part an estate, currently £325,000, to be free of IHT) was lost. However, the law changed on October 9 2007. Since then, any part of the NRB not used when the first spouse dies can be added to the surviving spouse’s own NRB (even if they died before October 2007). When the surviving spouse dies, it’s up to their executors to claim any unused portion of the NRB from the first spouse, plus the full NRB of the second one.

How to claim

The claim for any balance of NRB from the first spouse is made on Form IHT216. This must be submitted to HMRC following the death of the surviving spouse within 24 months from the end of the month in which the second spouse died. As well as the forms, the Taxman expects the executors to send evidence proving that some or all of the unused NRB can be transferred.

Failure leads to delays

HMRC has stated that up to 80% of estates fail to provide the evidence needed to support their claim. It has also said that it won’t process a claim until the necessary documents are received. As a grant of probate will not be given by the Probate Office until clearance from the Taxman is received, this too can be held up.

Tip. Apart from the Form IHT216, to make a successful claim for the transfer of an NRB the following documents must be supplied with the IHT216: (1) marriage certificate of the couple; (2) death certificate of the first spouse; and (3) grant of probate for the first spouse.

As some of these may have originally been issued many years ago there’s a fair chance they could have gone astray.

Tip 1. Copy documents can be obtained from the General Register Office. There’s an administration charge for this service, usually £10.

Tip 2. Your proof doesn’t have to be the original documents or official copies, certified copies will do. So if the family solicitor had a copy of the document at one time, then they can issue a certified copy. There may be a fee for this, it depends on how much trouble the solicitor has to go to, so ask about the cost first.

Don’t leave it too late

Anyone who has been widowed and is not sure whether their spouse had any unused NRB to transfer, should take action now. This should avoid important information and documents being lost “in the midsts of time”.

Tip. Obtain and complete an IHT216 form now. It will help you to calculate the proportion of NRB unused by the first spouse. This is then recorded at Box 12 of the form. File the form with your will and perhaps make additional copies for your family and executor

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Transferring an IHT advantage

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