QUICK SUCCESSION RELIEF (OR SUCCESSIVE CHARGES RELIEF)
04/04/2009
Quick succession relief under s.141 IHTA 1984 applies where the death of the transferee occurs within five years of an earlier chargeable transfer made to him or by the termination during his lifetime of an interest in possession trust subject to s.49(1) IHTA 1984 – s.52(1) IHTA 1984. The relief is not available to actual transfers since it is designed to provide relief where there are two transfers in quick succession which are beyond the control of the taxpayer.
Where an estate is eligible for this relief the IHT 400 calculation form will need to be used to complete your IHT calculation rather than using the boxes on the IHT 400 itself.
Total tax is calculated in the normal way and then reduced by the relief. There are some special rules in relation to the termination of an interest in possession during the life tenant’s lifetime.
The relief is calculated in two stages:
1. Make the following calculation:
| Prev. transfer (PT) net of tax | x tax paid on PT |
| Prev. gross transfer |
2. The following percentage is then applied to the calculated amount:
| Period between transfer and death | % relief |
| Less than 1 year | 100% |
| 1 to 2 years | 80% |
| 2 to 3 years | 60% |
| 3 to 4 years | 40% |
| 4 to 5 years | 20% |
It is more complex than it looks on the face of it. The value transferred by the first transfer, which increases the value of the claimant’s estate, will normally exceed the amount by which the claimant’s estate was increased by that transfer because of the tax paid on the first transfer.
Example
Mrs Iver died on 17 November 2006 leaving a few charitable legacies and the residue of her estate equally to her three children. The estate was valued at £220,878 and the charitable legacies totalled £7,500. Mrs Iver made the following lifetime gifts:
13 October 2000 to Mr James Iver £98,000
21 May 2003 to Miss Kathryn Iver £110,000
4 December 2005 to Mrs Laura Lode £115,000
Mrs Iver’s daughter, Mrs Laura Lode, died on 24 March 2009 leaving her entire estate to her children. The estate was valued at £491,550. Laura made no lifetime gifts.
The lifetime gifts meant that there were two transfers on which Laura’s estate might claim quick succession relief:
- The PET which became chargeable; and
- The transfer of a share of her mother’s residuary estate
As far as the lifetime gift is concerned, the earlier gifts to Laura’s siblings meant that only part of Laura’s gift was covered by annual exemptions and the available NRB. As a result of her mother’s death the amount of the lifetime gift Laura received was £107,000 [£(115,000 – 8,000)] I.e. the amount of the legacy when the prior gifts to her siblings, annual exemptions and nil rate band had been taken into account.
The gross value of the gift to Laura was £115,000 so the proportion of the tax due as a result of her mother’s death that is relieved by quick succession relief is £107,000 ÷ £115,000 x £8,000 i.e. £7,443.48 and the relevant quick succession percentage is 40% so the relief is 40% of £7,443.47 which is £2,977.39.
Practice point
Quick succession relief looks simple but can prove a little tricky. It is important to calculate the tax attributable to the increase in second estate and not include the tax attributable solely to the decrease in the value of first estate.
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