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

Chris Street

6th August 2017

By Louise Misiewicz

Are you aware of the rules and regulations around IHT?

What tax-efficient measures can landlords put in place?

I’ve been writing as series of blog articles on inheritance tax advise for property investors, based on a checklist I gave to a new buy-to-let landlord client recently during a meeting.

This week is Part Three.

I was discussing inheritance tax (IHT) liabilities with a new buy-to-let landlord client as part of a new Wealth Planning Review our property tax experts now offer and it was clear that IHT is an area which causes stress for many property investors.

The purpose of this blog serialisation is to provide an easy-to-use checklist reference tool when dealing with IHT matters, so that buy-to-let landlords can more easily deal with related tax planning matters.

How can property investors navigate IHT legislation?

This week, I’m going to share a number of questions I asked my landlord client – along with the advice I provided him for each question on risk management and tax planning. The blog article will highlight some of the common queries raised by HMRC, and outline potential areas to be considered by property investors. This allows us to develop a simple checklist resource is available when considering inheritance tax issues.

Question: Have the rules for excepted estates been considered?

HMRC has provided feedback in the past stating that they receive completed incorrect forms from landlords. Completing the wrong form can cause an unnecessary extra amount of work, which then leads to delays in finalising and dispersing estates.

My advice to my investor client was to check the guidance available, to see which of the three categories of excepted estates and within the limits of what qualifies as an excepted estate in the first place. It’s worth considering if a fully-completed IHT400 form needs to be submitted even if there is no IHT to pay.

To determine whether the estate is excepted or not, it’s advisable to consult with a professional advisor, or to consider speaking to a property tax expert.

Question: Has enough time been given to prepare form IHT400?

This critical document needs to be given plenty of time to research and complete, to ensure that the right IHT is due. Whilst HMRC recognises that investors and interested parties want to obtain probate rapidly, dealing with an estate can be complicated and time-consuming.

However, not allowing sufficient time to speak to relevant parties and gather information can lead to omissions and mistakes, as I advised my client.

It is, for example, important to remember not to mistake the tax payable date (six months from the end of the month in which the death parties) with the form IHT400 submission date (12 months from the end of the month in which the death occurred).

There can be confusion among property investors with this and the date interest starts to run on any unpaid IHT.

According to HMRC, this can result in large numbers of incomplete or incorrect forms being submitted within six months of the date of death.

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Question: Have the Will and associated documents been obtained, with copies enclosed with form IHT400?

Failure to review and provide copies of the Will and other critical information with form IHT400 is a common error according to HMRC, and results in delays. One of the most common errors is a failure to review and provide details about beneficiaries occurred this affects the IHT position of the estate, such as money being left to charities.

As I advised my landlord client, enquiries may be raised by HMRC if they don’t receive copies of Wills, codicils, Deeds of Variation, or other relevant documentation. I suggested that the client ensured he checked all documents thoroughly.

Question: Has the deceased’s paperwork relating to assets and liabilities been checked, including any overseas and assets held in Trusts?

Check the deceased’s paperwork including recent tax returns. Clear up any anomalies or discrepancies before completing form IHT400. Take into account any asset which the deceased had, and consult additional documents where possible, such as insurance policies, share certificates and gilts which might list additional assets. 

With foreign assets, I also advised my client to consider the position under local law when considering form IHT400, as foreign assets such as holiday homes, related household goods and bank accounts are commonly overlooked resulting in estates being undervalued.


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What preparation do investors need to consider with IHT?

The next question I asked my buy-to-let landlord client to consider around IHT was have family and business associated been consulted, and do they understand the terminology used?

This is important, as relevant information to the estate may be missed. Words and terms used by HMRC may not be understood by investors, friends, family and/or business associates. In particular, gifts and assets may be overlooked and undisclosed leading to complications and penalties later down the line.

HMRC states that it’s important for property investors to obtain details from family members, and anyone with power of attorney, as well as approaching solicitors, accountants, financial advisers and business associates.

People often keep details of their finances private, or their personal and business information separate. My advice to my landlord client was consult with anyone who had knowledge of the deceased’s affairs.

Useful articles for buy-to-let landlords to consider on IHT include:

Next week, I’ll examine Part Four of the inheritance tax toolkit for buy-to-let landlords, and will be providing further essential guidance for property investors around dealing with IHT legislation.

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