Explanatory note

These Regulations amend the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004 (S.I. 2004/2543) (“the principal Regulations”).

Regulation 1(2) and (3) states when these Regulations come into force and specifies the date from which individual regulations take effect. Regulation 1(4) defines “the principal Regulations”.

Regulation 2 amends the definition of “IHT threshold” in regulation 2 of the principal Regulations to provide that the term has the meaning given in new regulation 5A of the principal Regulations.

Regulation 3 amends regulation 4 of the principal Regulations.

Paragraph (2) provides that regulation 4(2)(d) is now subject to regulation 4(7A) as well as regulation 4(7). Paragraph (2)(a) makes a similar provision in respect of regulation 4(3)(d).

Paragraph 3(c) inserts new sub-paragraph (ea) into regulation 4(3) of the principal Regulations. This adds a new condition in paragraph (3) so that on the relevant person’s death, at least part of that person’s estate must pass to the person’s spouse/civil partner or to a charity.

Paragraph (4) amends regulation 4(6) of the principal Regulations to provide that the definition of “specified transfers” is now subject to paragraph (7A).

Paragraph (5) inserts paragraph (7A) into regulation 4 of the principal Regulations. This new paragraph provides that transfers by a person which total over £3,000 in any period from 6th April in a year until the following 5th April and which are exempt transfers under the “normal out of income exemption” pursuant to section 21 of the Inheritance Tax Act 1984, will be treated as chargeable transfers for the purposes of paragraphs (2)(d) and (e), (3)(d) and (e) and (6) of regulation 4 of the principal Regulations, but only where they are made within 7 years of the death of the relevant person.

Regulation 4 inserts new regulation 5A into the principal Regulations. This new regulation provides as follows.

Paragraph (1) sets out the definition of “IHT threshold”.

Paragraph (2) provides that, where the criteria set out in sub-paragraphs (3) and (4) are met, the expression “IHT threshold” means “the IHT threshold” as increased by 100 per cent.

Paragraphs (3) and (4) set out the criteria that must be met in order for the IHT threshold to be increased by 100 per cent pursuant to paragraph (2).

Paragraph (5) provides that for the purposes of paragraph (4)(e) of new regulation 5A, in determining whether the relevant person has made a chargeable transfer, any business property relief or agricultural property relief, under sections 104 and 116 of the Inheritance Tax Act 1984 respectively, shall not apply.

Paragraph (6) provides that transfers in any period from 6th April in a year until the following 5th April, which total over £3,000 and are exempt transfers under the “normal out of income exemption” pursuant to section 21 of the Inheritance Tax Act 1984, will be treated as chargeable transfers for the purpose of paragraph (4)(e) of new regulation 5A, but only where they are made within 7 years of the death of the relevant person. Paragraph (7) provides that paragraph (6) has effect in relation to deaths occurring on or after 1st March 2011.

Regulation 5 amends regulation 6 of the principal Regulations. Paragraph (2) substitutes the existing paragraph (1) with a new paragraph (1). This substituted paragraph provides that in a case where a person is not required to deliver an inheritance tax account to the Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) by virtue of these Regulations, that person must produce to the Commissioners the information specified in regulation 6(2) and where appropriate regulation 6(2A) of the principal Regulations.

Paragraph (3) inserts new paragraphs (2A) and (2B) into regulation 6 of the principal Regulations. Paragraph (2A) lists the additional information that must be produced to the Commissioners in the circumstances set out in regulation 6(1) of the principal Regulations. Paragraph (2B) defines two terms that are used in paragraph (2A).

Paragraph (4) makes two minor amendments to paragraph (3) of regulation 6 of the principal Regulations, in consequence of the amendments set out in regulation 5(2) and (3) of these Regulations.

Regulation 6 amends regulation 7(1) of the principal Regulations, to refer to new regulation 6(2A) of the principal Regulations as well as regulation 6(2).

A full Impact Assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.