Inheritance Tax toolkit for buy-to-let landlords – Part Seven

Chris Street

20th August 2017

By Louise Misiewicz

Do you have measures in place for inheritance tax liability?

Are you taking the necessary UK tax planning precautions?

This week I’m concluding the current serialisation with Part Seven of the useful IHT Toolkit resource blogs.

You can read the first part of the article series here – IHT 400 – what is it and what is it for

Part Two of the IHT Toolkit blog posts is in full here – IHT 400 check list questions

Part Three of the article series can be seen here – Paperwork to accompany IHT 400 form

Part Four of the blog serialisation can be reviewed here – Historical transactions with the estate 

Part Five of the IHT Toolkit blog series is her – Gifts and transfers

Last week’s Part Six article can be seen in full her – Pensions and inheritance 

Now looking at Part Seven – Estate valuations both in the UK and overseas

I’m completing the IHT Toolkit of questions which I asked my client.


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Question: Has the open market value at the relevant date been obtained and used for each asset?

According to HMRC, valuation is a high risk area, particularly where a valuation is not referred to a qualified and independent valuer. It’s not sufficient to simply refer a valuation to a valuer. In the absence of full instructions, a valuer will not necessarily understand the context to make a full valuation.

I advised my client that additional details need to be considered for all assets, such as the potential for land to be developed, plus the existence of tenancies or occupancy on land by people other than the deceased.

For example, this could mean separate valuations for farms, other dwellings, farm outbuildings, the land, and the rights for lands to be used for fishing, shooting, and mineral uses.

For overseas assets, it’s important to ensure an accurate valuation for IHT purposes, and that an overseae valuer, as under overseas law these often have a different basis to valuations in UK law.

I advised my landlord client that when obtaining a valuation, to use a qualified, independent valuer, to explain the context, and to draw their attention to the definition in S160 Inheritance Tax Act 1984 to market value.

One simple method of helping HMRC to understand and verify overseas valuations, for example, is to provide full address details, with full descriptions of any facilities, outbuildings, as well as case photos, and a full copy of the professional valuation reports.

Question: Have the valuations of Trust assets been obtained and do they include any income yet to be paid?

If correct valuations have not been obtained from the Trustees, I informed my client during our meeting that it is impossible to calculate the correct IHT liability on the estate.

Full details and valuation information needs to be collated to complete form IHT418 Assets held in Trust.

It’s also important to establish if there is any income due to the deceased which has not been paid prior to death. The valuation of certain Trust interests will need to be included in the IHT calculation of the estate.

Question: Has the form IHT400 and all accompanying schedules been checked for accuracy?

Omissions and mistakes may come from delays in processing form IHT400 and returning form IHT421 Probate Summary, which could lead to compliance checks being raised by HMRC.

I advised my property investor client that if questions are not fully answered on supplementary forms, HMRC may well need to follow up with additional queries to accurately establish IHT liability.

I advised my client to ensure that he had obtained and verified all the deceased’s details as requested on form IHT400, including that all relevant boxes are completed, answering all the questions in the required schedules, and providing complete and legible copies of all relevant documentation.

Another consideration is to check that the personal representatives have read the completed form, and that all accompanying schedules have been signed on the form IHT400.

HMRC receives a large number of incorrect and incomplete forms IHT400 and schedules, which lead to extra expense and delays in finalising inheritance tax liability on deceased person’s estates.

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Question: Is the inheritance tax calculation accurate?

I asked my client to ascertain this, and although it seems like an obvious point, when calculating the IHT due, exemptions and reliefs, in particular the transferable nil band rate, HMRC see the wrong amount being claimed.

Errors in the calculation of inheritance tax may lead to delays in processing form IHT400, meaning that repayments of tax might be required. I recommended that my client use the IHT400 calculation worksheet to estalish the inheritance tax. This covers the common aspects but not the more unusual ones.

There are a number of additional factors to consider, and this would take considerable time to outline and run through here – as always, I advised my client to ensure that all documentation had been fully reviewed.

Question: Has the inheritance tax payment that is due been paid?

This was my final question to my buy-to-let landlord client during our Wealth Planning Review meeting, and possibly the most important consideration.

If the payment is sent with form IHT400, this can delay the process for obtaining probate, as the payment has to be processed by HMRC Accounts Office, and cheques then have to be paid onto them to be banked before form IHT421 Probate Summary can be authorised.

Paying any due inheritance tax electronically is the quickest and easiest way. If payment is being made by cheque, it’s important that the inheritance tax reference number is written on the reverse and that the cheque is accompanied by a payslip.

My main advice is to always seek professional tax advice on all issues relating to inheritance tax, and to ensure that your tax planning measures are fully in place to minimise IHT payments made on assets.

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