The Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004

Explanatory Note

(This note is not part of the Order)

These Regulations replace the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2002 (S.I. 2002/1733) (“the 2002 Regulations”) in relation to estates of persons who died on or after 6th April 2004. The 2002 Regulations and these Regulations make provision in relation to the delivery of accounts and other information for inheritance tax purposes. These Regulations make some new and different provisions, these are noted below.

Regulation 1 provides for citation, commencement and effect.

Regulation 2 interprets some of the terms used in the Regulations.

Regulation 3 provides that a person is not required to deliver an account for inheritance tax purposes under section 216 of the Inheritance Tax Act 1984 (c. 51) (“the 1984 Act”) of property comprised in an excepted estate. This regulation also includes a new provision in relation to estates which no longer qualify as an excepted estate following the alteration of the dispositions taking effect on death within section 142 of the 1984 Act.

Regulation 4 defines an excepted estate. There are three categories of excepted estate, these are as follows. The first category is where the aggregate of the gross value of the estate and the value of certain lifetime transfers of a person domiciled in the United Kingdom does not exceed a certain amount, determined by either the inheritance tax nil rate band for the year in which death occurred or the previous year. This is based on the first category of excepted estates in the 2002 Regulations but differs in the following respects. First, the limit on the aggregate of the gross value of the deceased estate and the value transferred by certain lifetime transfers is directly linked to the inheritance tax nil rate band. Second, as in the 2002 Regulations the lifetime transfers to be taken into account include specified transfers which are defined, but the definition differs in these Regulations as the property which may be transferred is extended to include personal chattels and corporeal moveable property. Third, in valuing specified transfers the Regulations now provide that business property relief and agricultural property relief in sections 104 and 116 of the 1984 Act shall not apply. Finally, a new class of lifetime transfer which must be taken into account is introduced in these Regulations, these are defined as specified exempt transfers.

The second category is a new category of excepted estate introduced in these Regulations where the aggregate of the gross value of the estate and the value of certain lifetime transfers of a person domiciled in the United Kingdom does not exceed £1,000,000 and that aggregate value after deduction of liabilities and the value of any spouse and charity transfers made on death does not exceed the inheritance tax nil rate band.

The third category is where the deceased was never domiciled or treated as domiciled in the United Kingdom and his estate in the United Kingdom consists only of cash or quoted shares or securities with a gross value not exceeding £100,000. This is the same as the equivalent provision in the 2002 Regulations.

Regulations 5, 6 and 7 are new provisions.

Regulation 5 defines spouse and charity transfer.

Regulation 6 specifies the information that must be produced to the Board of Inland Revenue in the case of excepted estates and regulation 7 specifies to whom it must be produced.

Regulations 8 and 9 provide for the discharge of persons and property from tax in relation to property comprised in an excepted estate. Regulation 8 differs from the equivalent provision in the 2002 Regulations to reflect the fact that specified information now must be produced to the Board for excepted estates. Regulation 9 is the same as the equivalent provision in the 2002 Regulations.

Regulation 10 makes provision for excepted estates in relation to transfers reported late under section 264 of the Inheritance Tax Act 1984. This has the same effect as the equivalent provision in the 2002 Regulations.

Regulation 11 revokes the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2002 (S.I. 2002/1733) and the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2003 (S.I. 2003/1688) in relation to persons who died on or after 6th April 2004.

These Regulations do not impose new costs on business or charities.