Completing the IHT100 Forms following the declaration of an Old Mutual Wealth/Old Mutual International Discounted Gift Trust (Discretionary version) or Old Mutual Wealth/Old Mutual International Discretionary Trust (Settlor excluded and Settlor included versions).
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 http://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:
Excepted transfers (Test 1)
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.
Excepted transfers (Test 2)
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 Old Mutual Wealth trusts affected by the changes are considered to fall under test 2.
- 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.