IHT, trusts and estates


  1. Conditional exemption for heritage property
  2. Domicile status for IHT
  3. Completing the IHT forms and paying IHT
  4. Payments on account for trustees and PRs
  5. The execution of Wills
  6. Thinking ahead ― maturing child trust funds

Conditional exemption for heritage property

A deferral of IHT is possible for certain categories of heritage property. See the Heritage property ― conditional exemption and Heritage property ― loss of conditional exemption guidance notes for the basic rules.

HMRC has updated its guidance on heritage assets to add information about temporary changes to the Conditional Exemption Tax Incentive Scheme.

HMRC recognises that it may not be possible for owners of properties or assets in the Conditional Exemption Tax Incentive Scheme to meet all their undertakings due to coronavirus (COVID-19).

The updated guidance includes explanations on how HMRC deals with cases relating to closing or delaying the opening of a national heritage property, conditionally exempted objects on loan to other organisations that close due to government advice, objects that can only be seen by appointment, and difficulty in advertising, publicity and producing promotional material.

Domicile status for IHT

In the event of a death, an individual who is UK domiciled or deemed domiciled will be subject to IHT on all their worldwide assets, while an individual who is not UK domiciled will be liable to IHT only on assets located in the UK. A significant factor in determining domicile status is UK residence as defined by the statutory residence test. An individual becomes deemed domiciled for IHT purposes after being resident in the UK for at least 15 out of the last 20 tax years preceding the last one.

See the Domicile for UK inheritance tax and Application of the deemed domicile rules guidance notes.

A person’s domicile status could be changed by an unplanned period of residence in the UK due to the coronavirus lockdown situation, either in the UK or the country to which they would wish to return. Since we have just finished a tax year, it is possible, though unlikely, that being detained in the UK at this point will change a person’s residence status for 2019/20. Continuing residence into 2020/21 could similarly affect tax residence and consequently domicile.

Those affected may be able to rely on the ‘exceptional circumstances exception’ to disregard up to 60 days of UK residence in either or both tax years.

See Tax issues for the internationally mobile: UK residence issues.

Completing the IHT forms and paying IHT

For most assets in the estate, the procedure for valuing those assets is generally done remotely, so should not be impacted too greatly by isolation.

Where it is necessary to obtain valuations of the deceased’s property and chattels, it may be difficult to obtain valuations without the valuer attending the property. In these circumstances, the personal representatives should seek estimated values (perhaps emailing photographs) and include these in the IHT400, noting that they are provisional values. Later, revised valuations can be submitted to HMRC.

HMRC updated its guidance in May on the IHT400 to confirm that it will accept unsigned forms from executors or administrators acting without the help of a professional agent, subject to certain conditions. See Inheritance Tax account (IHT400). As previously confirmed, payments by cheque are no longer accepted and repayments will be made by bank transfer.

For further information on the IHT400 generally, see the IHT400 guidance note.

HMRC has also updated coronavirus measures in relation to the IHT100. From now on, IHT100 forms no longer need to be signed, regardless of whether one has a professional agent or not, to be accepted by HMRC.

Forms from professional agents will be accepted if:

  • the names and personal details of the trustees are shown on the declaration page
  • the account has been seen by all the trustees and they all agree to be bound by the declaration
  • the following statement is included: ‘As the agent acting on their behalf, I confirm that all the people whose names appear on the declaration page of this Inheritance Tax Account have seen the Inheritance Tax Account and agreed to be bound by the declaration on page 8 of the IHT100’

See Inheritance Tax account (IHT100).

In June, STEP published details of the meeting between HMRC’s Trusts and Estates team and the Agents Advisory Group and Capital Taxes Liaison Group and provided a number of updates, including the following:

  • a new webchat service was launched in May, which can be used to obtain help when completing the IHT400 forms and schedules
  • HMRC has confirmed that IHT421 forms can now be emailed directly from HMRC to HM Courts and Tribunals Service
  • the digital signature process now applies to IHT205 forms as well as IHT400 and IHT100 forms, until further notice
  • HMRC is offering Dropbox as a temporary measure to support agents when it is not possible or practical to submit IHT400 and IHT100 accounts by post during the coronavirus disruption
  • HMRC has enquired about deadlines for IHT relief claims that may be impacted by the present disruption customers are facing. The three areas that have been raised are the time limits for: relief on property sales, relief on sale of shares and instruments of variation. HMRC is continuing to monitor the position

Payments on account for trustees and PRs

The second self assessment payment on account for the 2019/20 tax year is deferred from 31 July 2020 to 31 January 2021.

HMRC has confirmed to the ATT that this deferral includes payments on account made by trustees and personal representatives (PRs).

For further details, see Deferral of second self assessment income tax payment on account for 2019/20 and the Payment of income and capital gains tax guidance note.

The execution of Wills

Self-isolation and social distancing rules are proving problematic for all those involved in the preparation and execution of Wills.

One of the formal requirements for execution of a Will is that the document must ‘be witnessed and each witness must attest and sign the Will or acknowledge their signature, in the presence of the testator (but not necessarily in the presence of any other witness)’.
Wills Act 1837, s 9

See the Drafting a Will guidance note.

In the current circumstances, many testators will struggle to find individuals willing to meet with the testator for this purpose ― presence includes both physical and mental presence.

The Ministry of Justice has confirmed that the government will legalise the remote witnessing of Wills in England and Wales to make the process easier during the coronavirus pandemic. The new laws will mean that Wills witnessed via video link are legally recognised so long as the quality of sound and video is sufficient to see and hear what is happening.

The measures will be backdated to 31 January 2020, meaning that any Will witnessed by video from that date forward will be legally recognised. The update will remain in place until 31 January 2022, or for as long as it is deemed necessary.

The government has also provided guidance on making Wills via video-conferencing during this period. Despite the update, government has insisted that people must continue to arrange physical witnessing of Wills where it is safe to do so, and the use of video technology must be a last resort.

Thinking ahead ― maturing child trust funds

The child trust fund is a tax efficient savings and investment account which matures when the child to whom the fund belongs turns 18. Child trust funds will be maturing for the first time in September 2020. See the Child trust funds guidance note.

The fund is a long-term investment medium, and this means that its value can go up or down in accordance with the market performance of its underlying assets. Volatility in the market can affect the value of the fund, particularly due to short-term shocks in the economy. The coronavirus pandemic has resulted in a global economic crisis that has impacted the value of invested funds very significantly.

If the value of the child trust fund at maturity is significantly less than expected, it may then be worthwhile considering giving no instructions to the account provider. This would leave the fund as a ‘protected fund’ that retains all its tax advantages. Once the market recovers and the underlying value of the fund is restored, instructions can then be given by the 18-year-old to either close it and withdraw the funds, or reinvest it into an adult ISA.

Any money reinvested from the child trust fund does not count towards the annual ISA contributions allowance. This excludes money moved into a lifetime ISA, which will count towards the lifetime ISA allowance for the year. See the Individual savings accounts guidance note.