There is evidence that wording on Inheritance Tax (IHT) claim form IHT436 has lead to some executors underclaiming relief for the transfer any unused residence nil rate band (RNRB) on IHT returns and HMRC is not picking up the error.
A claim to transfer unused RNRB can be made if the deceased is claiming IHT 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 HMRC's form IHT436 are entered in boxes 11 to 15 of the form as you work out how much if any, 'residential enhancement' is available following the first death.
When you get to box 14, you then are required to enter 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 (that is shown in box 11). We have seen cases where some executors are misreading the form and claiming a lower amount based on the first death.
The notes correctly show the amounts to be claimed in Box 14. E.g. If the second death was after 2020, the amount is £175,000, even if the first death was, say, in 2018/19
The amount of the claim is called the 'Residential Enhancement', this is:
• £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 errors
Errors such as this on IHT returns can be corrected by writing to HMRC. Anyone who would like professional assistance in correcting returns can also contact the Virtual Tax Partner support service for assistance.
Useful guides on this topic
Inheritance tax & Probate
Our guides cover all the key aspects of IHT: if you cannot find what you are looking for you may commission a guide.
IHT: Main Residence Nil-Rate Band (RNRB)
What is the Main Residence Nil-Rate band? When was it introduced? How does it work? Who can claim it?
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