Following on from part three of our series on practical tips for Estate Administration, this blog discusses how to report the value of the estate to HMRC, payment of Inheritance Tax (IHT) and applying for the Grant of Representation.

Inheritance Tax Account – IHT205 or IHT400

Once the Personal Representatives (PRs) have established the value of the estate for IHT purposes they must report the value to HMRC via form IHT205 or IHT400. The form required depends on the value and type of assets in the estate.

IHT 205
Where the estate is an ‘Excepted Estate’, the PR should complete the short form account, IHT205, and send this to the Probate Registry when applying for a Grant of Representation. This will be forwarded to HMRC once the Grant is issued. It is also now possible for lay representatives to file an IHT205 online here.

The estate will be classed as an ‘Excepted Estate’ where the gross value of the estate for Inheritance Tax is less than or equal to

  • £325,000;
  • £650,000 and a claim to transfer 100% of the unused nil rate band of a predeceased spouse is made; or
  • £1million and there is no Inheritance Tax to pay because of spouse, civil partner or charity exemption.
  • An estate will not be an ‘Excepted Estate’ where;
    – the estate includes any asset subject to the gifts with reservation of benefit rules; or
    – the estate includes a qualifying interest in possession; or
    – the estate includes assets outside of the UK with a value over £100,000

IHT 400
Where the estate is not an Excepted Estate, the PRs must submit a long form account, IHT 400. The completed IHT400 and all necessary schedules and supporting documents must be sent direct to HMRC with a completed IHT421.

How to pay
If IHT is due, the PRs will need to apply for an IHT reference number before they can submit the IHT400 and pay the tax. This can take three weeks to be sent and therefore the PRs should apply in plenty of time.

There may be some assets which can be released before the Grant of Representation is obtained and these can be used to satisfy any IHT liability. It is also possible to arrange the payment of IHT directly from the deceased’s bank accounts by using form IHT423.

Details on how to apply for an IHT reference and how to make payment of IHT are available here: https://www.gov.uk/paying-inheritance-tax

To avoid interest charges any tax due must be paid by the end of the sixth month after the date someone dies.

Once HMRC has received the IHT400 and payment of tax it will issue a stamped IHT421 within 10 working days. This allows the PRs to apply for the Grant of Representation. Where the PRs are applying for the Grant of Representation online, HMRC will send the IHT421 direct to the Probate Registry. It is recommended the PRs wait 14 days from sending the IHT400 to HMRC before finalising the online probate application and sending the documents to the Probate Registry to ensure the IHT421 is received.

Applying for a Grant of Representation

A Grant of Representation provides the PRs with authority to deal with the deceased’s assets. There are two types of Grant of Representation:
– Grant of Probate (where the deceased left a Will); and
– Letters of Administration (where the deceased did not leave a Will or the Will does not appoint Executors).

How to Apply

The simplest way to apply is online. The system will generate a statement for the PRs to sign and an application checklist. The checklist should then be sent with the documents listed to the address shown on the checklist. In some situations, it is not possible to apply online and PRs should therefore read the additional guidance on the link below before beginning an online application.
Alternatively, the PRs will need to complete form PA1P (if the deceased left a Will) or PA1A (where there is no Will) and send the form with the required documents to HMCTS Probate, PO Box 12625, Harlow, CM20 9QE.
Online Probate, further guidance and forms PA1A & PA1P are available here: https://www.gov.uk/applying-for-probate/apply-for-probate

We hope this guide has been helpful in identifying the steps to take to apply for a Grant of Representation. If you would like any further information or assistance administering someone’s estate, then please do get in touch.

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