News

On January 1 2022 new rules came in to effect which dictate the way excepted estates are to be reported to Her Majesty’s Revenue and Customs (HMRC).

Firstly, what is an excepted estate?  In very general terms, an excepted estate is one that is not required to submit a full account of the estate to HMRC, primarily, but not necessarily, because it is not subject to inheritance tax.  As well as not being taxable, excepted estates must meet a number of other conditions to qualify, which is outside of the scope of this particular article but can be viewed here.  If the estate does not meet all the conditions, you may still need to submit a full account to HMRC, commonly known as the IHT400, even though there is no inheritance tax to pay.

For deaths before January 1 2022, excepted estate were required to complete a simple return of information, commonly known as the IHT205.  The return included details about the deceased, confirmation that the excepted estate conditions have been met, entries of the deceased’s assets and liabilities together with their values, the exemptions/reliefs being claimed and a declaration which had to be signed by the personal representatives.

As part of a wider consultation to simplify tax and recognising that the IHT205 yielded little to no use to either personal representatives or HMRC, it was dispensed with.  Now, personal representatives no longer have to complete an IHT205, rather, they ‘simply’ have to provide total values for the estate which are submitted on the probate application forms.  Although the executors still have to collect much the same information as before in order to get the total values required for the probate application forms, they now have one less form to complete at the end of it.

Clearly, the simplification of any tax is welcome news to all parties, but the benefits in this instance are largely felt by HMRC.  For agents such as ourselves who handle IHT (Inheritance Tax) returns and probate applications daily, dispensing with the IHT205 has helped reduce the amount of paperwork for clients to check and sign and this is certainly a boon.  However, the information collected for the IHT205 is still required in order to arrive at the values needed for the probate application, even if the form itself is no longer in use.

So, despite the simplification, for lay personal representatives, often still grieving, wading through all the information, conditions and procedures for dealing with a deceased estate for the first time can still be a long, daunting and burdensome process.

If you are struggling with an estate administration or a probate application, please do get in touch with our expert team.  You can contact us or visit us at Dalston, Dumfries, Penrith or Workington.