Five Recent Changes To IHT & Probate Practice
The work of the probate practitioners is always developing despite the adage that nothing is quite so certain as death and taxes. Here are 5 topical notifications of changes to IHT and probate practice to keep you up to speed:
1. Reduced rate of IHT
HMRC have now published on their website their guidance with worked examples of how they expect us to deal with the computations for the reduced rate of 36% IHT on qualifying estates where 10% or more of the net estate is given to charity http://www.hmrc.gov.uk/inheritancetax/reducedrate.htm
There is also a Reduced Rate of tax calculator – http://www.hmrc.gov.uk/tools/iht-reduced-rate/index.htm
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The reduced rate applies to estates where the deceased died on or after 6 April 2012, but strictly this has to be confirmed by the Finance Bill gaining Royal Assent in July. Until then, HMRC will accept IHT 400s where the reduced rate has been applied if relevant and if for some reason the Act does not contain the same provisions on this subject as the Bill HMRC will make adjustments to the IHT bills of the estates affected.
2. Reporting amendments to IHT calculations
Another calculator has been developed to make it easier to calculate the amount of IHT and any interest due at any stage of the administration of an estate.
According to the Trust & Estate Newsletter for April 2012 http://www.hmrc.gov.uk/cto/newsletter.htm we will not need to notify HMRC of amendments to calculations unless:
- In total they amount to more than £50,000
- They comprise land or unquoted shares
- It involves loss on sales relief claims
- The case is already subject to compliance checks
There is now only a need to notify once – either when the estate is finalised or 18 months from the date of death, whichever is earlier using the Corrective Account – C4 – this feels like déjà vu!
Obviously, if the amendments are necessary because of a deliberate inaccuracy then HMRC must be notified immediately.
3. Personal applications for Probate
We all know that more and more estates are extracted personally. For an up to date piece of research see Title Research’s e-bulletin http://www.titleresearch.com/News/New-Data-Reveals-Problems-Wills-and-DIY-Probates
The Courts & Tribunal Service in England & Wales has revised the process for personal applicants which may mean more personal applicants may ask us to swear documents. The only problem with this is that the Oath will have been prepared by the registry and contributors to professional forums have indicated that some of these have been poorly prepared and need explanation to the applicant – something which is not covered by the swear fee, an added burden for which we are not likely to be able to charge.
Despite the fact that the swear fee was increased [The Non-Contentious Probate Fees (Amendment) Order 2011 SI 2011 No. 588] for swears undertaken by Registry staff the Trusts & Estates Newsletter for April 2012 states that if the personal applicant attends the Registry to swear the Oath there will be no charge and of course our swear fees remain at £5 for each Oath and £2 for each exhibit.
4. HMRC’s Bereavement Services
After some input from practitioners HMRC is creating dedicated teams for dealing with the bereaved where the deceased was either a PAYE or Self-Assessment tax payer.
The R27 has been redesigned to hopefully make it easier to complete.
From 11 April 2012 there will be:
- A single point of contact at HMRC
- A R27 which should enable the PR to finalise the tax affairs of the deceased as soon as practicable
The R 27 and any communications regarding PAYE or Self-Assessment should be sent to HMRC PAYE & Self-Assessment PO Box 4000, Cardiff CF14 8HR
5. Recent decisions concerning Agricultural Property Relief
The vexed question of gaining Agricultural Property Relief (APR) on ‘agricultural’ homes has been exacerbated by two recent decisions of the First Tier Tribunal.
APR is extended to farm buildings, farmhouses and farm cottages by s.115(2) IHTA 1984. In HMRC v Atkinson  UKUT 506 an infirm farmer died in a care home after having vacated his bungalow some four years before death. The farming partnership of which he remained a partner had an agricultural tenancy of the whole farm which included the bungalow. The deceased owned the freehold of the farm subject to the lease. The bungalow was said to be agricultural property but it was not occupied for the purposes of agriculture (and therefore failed to gain APR) simply because it formed part of the assets contained within the farming tenancy belonging to the partnership.
In Hanson v HMRC  UK FTT 95 the taxpayer had to establish that the house occupied by the deceased’s son was a farmhouse and agricultural property in order to gain APR. The ownership of all the farmland farmed by the son in this case was not held by the same person or persons but by a combination of a settlement of which the deceased was life tenant, jointly by the deceased and the so and some by the son alone. Did it matter that the farming operations were carried out by the occupier of the house but not by the owner of all the land being farmed by the occupier? ‘No’, said the Tribunal – all that matters for the purposes of APR is that there is common occupation between land and house and not common ownership as hitherto had been thought to be the case.
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