Inheritance Tax

Residential Nil-rate Band – Downsizing Addition

Following the introduction of the residential nil rate, Finance Bill 2016 will include provisions to extend the availability of the band to cases where, on or after 8 July 2015, the individual downsizes from a higher value residence to a lower value one or ceases to own a residence and other assets are left on death to direct descendants. The extension will come into effect at the same time as the main provisions, for deaths on or after 6 April 2017.

Treatment of Pension Scheme Drawdown Funds on Death

Provisions are to be included in Finance Bill 2016, with retrospective effect, to ensure that a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death.

Exemption for Compensation to Victims of Persecution

The Government is to legislate to put Extra Statutory Concession F20 on a statutory basis. The concession provides an IHT exemption for certain compensation and ex-gratia payments for World War II victims. The legislation will also extend the scope of the existing concession to include a payment made under a new compensation scheme, the Child Survivor Fund. The legislation will give the Treasury powers to add additional exemptions for payments to prisoners of war and civil internees. The legislation will apply to deaths on or after 1 January 2015.

UK Residential Property

The Government will legislate to charge inheritance tax on all UK residential property indirectly held through an offshore structure from 6 April 2017.

Estates Duty and Inheritance Tax: Objects Granted Exemption from Estate Duty

The following changes are made to the legislation to ensure that the scheme works in line with publicly stated policy:

  • with effect for chargeable events arising on or after 16 March 2016, the existing statutory provisions, which allow IHT to be paid at a lower rate than estate duty would be payable, will be aligned with the position for lifetime transfers;
  • with effect from the date of Royal Assent to Finance Act 2016 a charge will be created on objects which are currently subject to an estate duty exemption and which have been lost, except where the Commissioners are satisfied that the loss was outside the owner’s control, and galleries and museums who used to benefit from favourable tax exemptions but lost the benefit through transfers to charitable trusts will be brought back within the scope of the legislation.