How to complete IHT100 and IHT100a forms

The information contained in this article should be read in conjunction with HM Revenue & Customs (HMRC) form ‘How to fill in form IHT100’ (IHT110) which is available from www.hmrc.gov.uk. There is also a Probate and Inheritance Tax helpline - 0845 302 0900.  Since December 2010 forms IHT100, IHT100a to IHT100g, IHT105, IHT110, IHT113 and Schedules D31 to D41 will no longer be supplied by HMRC in printed from.  They will be available online only.

The following assumes:

• IHT100 is being completed in relation to the declaration of the trust and HMRC work out any tax due
• no previous transfers have been made
• the Settlor is paying any tax due
• the Settlor is UK domicile.
• the Test 2 threshold mentioned below has been exceeded.

HMRC have introduced new reporting thresholds for chargeable lifetime transfers (CLTs) made by individuals. These new rules apply to gifts made on or after 6 April 2007. There are now two tests, summarised below. The accumulation period for reporting has been aligned to the inheritance tax system and has been reduced from ten years to seven years.

Where an individual makes a CLT, the regulations introduce two new tests to determine when a report at the time the CLT is made to HMRC is NOT required and these can be summarised as follows:

a. The asset transferred is cash or quoted shares or securities, AND

b. The value transferred by the chargeable transfer, together with the values transferred by any previous chargeable transfers made by the transferor during the seven years preceding the transfer, does not exceed the IHT threshold*.

This means that CLTs of cash, quoted shares or securities will not be required to be reported where all CLTs made by the client in the previous seven years (including the CLT now being made) do not exceed the value of the individual’s available nil-rate band. In principle this means that reports in these circumstances will only be required where IHT is due.

* IHT threshold means the available nil-rate band taking into account previous transfers.

a. The value transferred by the chargeable transfer, together with the values transferred by any previous chargeable transfers made by the transferor during the seven years preceding the transfer, does not exceed 80% of the IHT threshold, AND

b. The value transferred by the transfer of value giving rise to the chargeable transfer does not exceed the net IHT threshold.

The net IHT threshold means the IHT threshold (currently £325,000 for 2010/11) less the summed values of all previous chargeable transfers made during the seven years preceding the current chargeable transfer (not including the CLT now being made). For the purposes of Test 2b above, business property relief and agricultural property relief will not apply in determining the value of the chargeable transfer. The 80% limit in Test 2a means the reporting level in 2010/11 is £260,000.

For example, for a CLT not to be reportable it must pass two tests; firstly that the cumulative total (current CLT £100,000 plus previous CLTs £125,000 = £225,000) does not exceed 80% of the current NRB (£260,000), and secondly that the current CLT (say £100,000) does not exceed the net IHT threshold (NRB £325,000 less previous CLTs £125,000 = £200,000).

So in this case, both tests have been met so reporting is not required.

All Skandia trusts affected by the changes are considered to fall under test 2.

Please see our article ‘UK inheritance tax reporting thresholds’ for full explanation of the new thresholds.

• If there are two Settlors (a Joint Settlor trust) then separate forms will need to be completed.
• IHT100 form needs to be submitted to HMRC within 12 months from the end of the month in which the transfer was made.

For Discounted Gift Trust (Discretionary version) the value of the CLT will be the value detailed in your client’s post sale Discounted Gift Trust letter ‘Discounted Value of Gift’; for Joint Settlor cases the CLT value will be that which relates to each Settlor, this is unlikely to be a 50:50 split.

For Discounted Gift Trust (Discretionary version) you will also need to provide a copy of the policy schedule and the Discounted Gift Scheme letter confirming the discount post underwriting.

All boxes on the IHT100 form and any supplementary pages that apply need to be completed. The figure ‘0’ should be written in the box if the assets described were not part of the transfer.

Section A About the Chargeable Event

A1        Tick box A1.

A2-A6   Leave blank and move to Section B.

Section B About the transferor/settlement

B1        Complete the title of the Settlor ie Mr, Mrs, Miss etc.

B2        Complete the surname of the Settlor.

B3        Complete the forename(s) of the Settlor.

B4        Complete the address of the Settlor.

B5        Complete the date of birth of the Settlor.

B6-B7   Complete with N/A.

B8        Complete the Settlor’s tax district.

B9        Complete the Settlor’s income tax or self-assessment reference, if known. Otherwise          leave blank.

B10      Complete the Settlor’s national insurance number.

B11      Complete the Settlor’s domicile. This is usually the country where their main home is. The United Kingdom is not a ‘country’ when establishing a person’s domicile. This would generally be England and Wales, Scotland or Northern Ireland.

B12-14 Leave blank – these are only applicable if A2, A3, A4 or A5 have been completed.

B15      Complete as appropriate.

Section C Person we (HMRC) should contact

C1        Complete the address of the person to whom communication should be sent.

C2        Complete the name of the person to whom communication should be sent.

C3        Complete as appropriate. DX stands for Document Exchange.

C4        Complete the telephone number of the person in C2.

C5        Leave blank.

C6        Complete the capacity of the person named in C2, eg Settlor.

Section D Supplementary pages

All boxes          

If you have a Royal Skandia Policy complete ‘Yes’ to the Foreign assets option, the supplementary page D39 will need to completed. All other boxes should be ticked ‘No’.

Section E Assets in the UK where tax may not be paid by instalments

E1-E10 Complete with ‘0’.

E11      Complete with ‘0’ if you have a Royal Skandia policy.

E12-E14 Complete with ‘0’.

E15      Complete the total assets. This will be the same figure as completed in E11.

E16      Complete with ‘0’.

E17      Complete the net total of assets less liabilities. This will be the same figure as completed in E15.

E18      Complete with ‘0’.

E19      Complete the chargeable value of assets in the UK where tax may not be paid by instalments.

This will be the same figure as completed in E17.

Section F Assets in the UK where tax may be paid by instalments

F1-F17 Complete with ‘0’.

F18       Complete any annual exemption being deducted. The maximum this will be is £6,000.

Sections G & H Summary of Chargeable Event and Working out the tax

Under the present law you do not have to calculate the tax that is due. Therefore go directly to Section J.

Section J Authority for repayment of inheritance tax

Complete the names of the people who want to receive any refund of tax.

Section K Declaration

K1        Complete ‘100a’.

K2        Complete ‘D39’ if you have a Royal Skandia policy. Ensure all the declarations are read and the Settlor should sign, date and put their capacity ‘Settlor of the Trust’.

This form relates to gifts and other transfers of value which are subject to the relevant property regime.

Name of transferor and Date of transfer

Complete the name of the transferor (the Settlor) and the date of the transfer (the date of the trust).

1 About the transfer

1.1        Name and addresses of the transferees, relationship with transferor, share and/or interest taken.

As the transfer is being made into a Discretionary Trust complete:

The name and addresses of the Trustees, complete the relationship as ‘Trustees of the [name of the Settlement]’ and Share 100%.

1.2        Complete ‘Yes’ as the Settlor is paying the tax.

1.3        Complete ‘No’.

1.4        Complete ‘0’.

1.5        Complete ‘No’ go to 1.7.

1.6        Leave blank.

1.7        Complete ‘No’ go to 1.9.

1.8        Leave blank.

1.9        Complete ‘No’ go to 1.11.

1.10      Leave blank.

1.11      Complete ‘No’ go to 1.13.

1.12      Leave blank.

1.13      Complete ‘Yes’.

1.14      Complete as follows ‘The gift was made to a Skandia Life/Royal Skandia Life assurance/Redemption Bond which was settled into a Discretionary/Discounted Gift Trust’.

2 Earlier transfers

2.1        Complete ‘Yes’.

2.2-2.5 If the Settlor has made a previous chargeable lifetime transfer within the last seven years complete ‘Yes’ and complete 2.4 and 2.5 as appropriate.

If no previous chargeable lifetime transfers have been made in the last seven years leave blank and complete 2.6 only.

2.6        Complete the nil-rate band applicable at the date of the transfer (the date of the trust).

3, 4, 5, 6 & 7 These Sections can be left blank

Completion of D39 Royal Skandia Policies

Complete the name of the Settlor and the date of the transfer (the date of trust).

1          Assets outside the UK where tax may not be paid by instalments.

FP1      Leave blank.

FP2      Complete ‘Trustees of the [name of settlement] Royal Skandia Bond [prefix and number

eg CIB/CRB 12345]’.

Complete the value of the gift eg this would usually be the premium value, for a DGT it will be the ‘Discounted Value of the Gift’.

FP3      Complete with the figure from FP2.

FP4      Leave blank.

FP5      Complete Figure from FP3.

FP6      Complete with any exemptions eg annual exemption.

FP7      This will be FP5 less box FP6.

2          All other sections can be left blank.

The completed form should be sent to:

HM Revenue & Customs

Capital Taxes

Ferrers House

PO Box 38

Castle Meadow Road

Nottingham

NG2 1BB