24.11.2008
Ahead of Pre Budget Report, HMRC introduces new reporting requirements on estates
On 17 November, HM Revenue & Customs issued new forms for use when reporting the estates of deceased persons. Currently, the core form is the IHT200 and it is accompanied by several supplementary forms in relation to specific assets and other items. The new IHT400 and accompanying forms will replace the IHT 200 form. In its note introducing the changes, HMRC characterises the reform as involving "major changes."
Commenting on the change, Julie Hutchison, Head of Estate Planning with Standard Life said, "In my opinion, the areas where more detailed information is now required reflect a "risk" approach being taken by HMRC, where areas known to, or likely to, involve under-reporting are being targeted. Some of the changes do, however, simply reflect updates, improvements in layout or the way certain areas have evolved."
Julie continued, "For example, the old D3A form was used to claim the normal expenditure from income exemption, where regular income gifts made by the deceased were claimed as exempt from IHT. The old form referred to tax year 2001/2002. The new form by contrast is not only updated to refer to 2005/2006 but also has double the number of entries to assist with entering income and expenditure information, and now breaks down the sources of funds and types of bills paid, which I think is helpful."
"The old D3 form was used to report lifetime gifts made within 7 years of death. It was only 2 pages long, and is now 6 pages long, which reflects a more user-friendly layout but also gives more prominence to gifts with reservation of benefit and pre-owned assets issues. It also incorporates income gift reporting, so it is more comprehensive."
"The new transferable nil rate band rules, which were introduced on 9 October 2007, also feature in this reform. There had been some criticisms that the process was rather heavy on paperwork for bereaved families and HMRC has responded to this positively by reducing some of the requirements. For example, sending the death certificate of the first spouse/civil partner to die is no longer automatically required, nor is the marriage certificate. Instead, there is now a declaration to sign on the main form IHT400 which confirms the parties were married. The signing of the declaration is a significant step, since a false declaration could result in prosecution."
Julie went on to say, "In August 2007, HMRC announced in its IHT and Trusts newsletter that it would be looking more carefully at the reporting of lifetime gifts, so it is not a surprise to see the new IHT403 which gives more prominence to aspects of this. It will make executors think more carefully about what they are signing. From a practical perspective, lawyers will be pleased that HMRC has introduced a transition period, so that the new forms can be used now, but the old style forms will still be acceptable until 9 June 2009. This should minimise administration problems."
Julie concluded, "Although the changes have simplified some aspects of reporting of estates, this is far from just being an administrative change."
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Standard Life Assurance Limited
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Lesley Davidson, PR Consultant
Standard Life Assurance Limited
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Notes to Editors
- Standard Life Assurance Limited is recognised for the high quality of its customer service, in particular for providing a service that is consistent, reliable and responsive. Standard Life received recognition for this in 2008 when the company were voted a 5 star provider at the Financial Adviser Service Awards for the 12th year running.
- Standard Life has approximately 7 million customers worldwide and provides an extensive range of products and services, aimed at meeting the financial requirements of customers throughout their lives.
- The announcement by HMRC and the various forms can be accessed at http://www.hmrc.gov.uk/cto/iht/news-iht400.htm