HM Revenue & Customs (HMRC) has amended the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 to exempt many estates from the need to submit an HMRC form. These estates can now use the probate/confirmation form instead:

• For deaths on or after 1 January excepted estates should no longer complete an IHT205/C5/IHT217 or use IHT online. They can instead apply directly for probate or confirmation. The probate/confirmation forms and online journeys are now updated to capture the required IHT information, which is significantly reduced. This is in addition to the excepted estate changes meaning more estates should now qualify as excepted.
• For deaths which have occurred prior to 1 January 2022, forms IHT 205/C5/IHT217 or IHT online should still be used, as the old excepted estate rules still apply to these estates.

The amendments apply to deaths occurring anywhere in the UK from 1 January 2022 and include:

• raising the threshold gross value of an excepted estate from GBP1 million to GBP3 million;
• raising the value threshold of an excepted estate’s chargeable trust property from GBP150,000 to GBP250,000, although the total amount of trust property including exempt amounts is limited to GBP1 million;
• increasing the value limit in relation to specified lifetime transfers from GBP150,000 to GBP250,000;
• amending the definition of ‘IHT threshold’ to include cases where some of the available threshold was used when the first of a married couple or civil partnership died and a claim is made for the unused percentage to be made available against the current estate (the transferable nil-rate band);
• simplifying the ‘alternative information’ that is to be produced for both small estates and exempt estates; and
• removing excepted status from estates of foreign persons where the deceased either owned indirect interests in UK residential property or made lifetime gifts of UK assets above GBP3,000 in the seven years before death, unless the estate is not liable for IHT.

The amended regulations also extend to 60 days the period during which HMRC can ask the personal representatives for additional information to show that the estate qualifies as excepted to 60 days. This brings the rules in England, Wales and Northern Ireland into line with Scotland’s regulations. At the same time, HM Courts and Tribunal Service (HMCTS) will be given a full month to transmit probate application information to HMRC.

HMCTS has informed users that updates to MyHMCTS will occur between 1 and 12 January 2022 and has requested that submissions of probate applications for estates impacted by the new regulations are avoided during that timeframe. STEP will keep members apprised of any further developments in due course.

Emily Deane TEP, STEP Technical Counsel