Inheritance tax – transfer of unused nil rate band

Guidance is now available on how the rules will work governing the transfer of unused nil rate inheritance tax band.

This measure was announced in the 2007 Pre-Budget Report and applies from 9 October 2007. The essence of the proposal is that proportion of the nil rate band that was not used on the death of one member of a couple will be available when the second member of the couple dies. (A couple is a married couple, or those in a civil partnership)

For married couples the first death may have occurred many years ago – even in pre-inheritance tax days. For civil partners the first death must have occurred on or after 5 December 2005. Legislation will be brought in as part of the 2008 Finance Act.

The guidelines, which cover 24 pages, cover such issues as:

What constitutes a valid marriage
Dissolution or separation
Procedure and time limits (usually 24 months from the end of the month of the second death)
Detailed examples of the calculation of relief available

Full details can be found at http://www.hmrc.gov.uk/cto/iht/tnr-draftguidance.pdf or you can contact us for more information and see what we can do to help reduce the tax burden.