IHTM14595 - Lifetime transfers: the charge to tax: the charge on lifetime transfers: late reported transfers

Where tax is accepted as having been paid in full on a transfer, and an earlier transfer is discovered late, IHTA84/S264 modifies the way you apply the cumulation principle.Ìý

It would obviously be unfair in such cases to revise calculations where the doneesÌýbelieve that the tax has been paid in full satisfaction. Instead, the additionalÌýtax payable on the later transfer is charged to the earlier (late declared) transfer, in addition to any tax directly due on that transfer.Ìý

The later transfer can include a transfer on death.Ìý

Tax paid in fullÌý

The date at which tax is accepted in full satisfaction (within IHTA84/S240 (2)) is the later ofÌý

  • the date of the last payment, orÌý

  • the date on which the tax or the last instalment became due.Ìý

or, if no tax was chargeable because the later transfer was treated as made within the IHT nilÌýrate band,Ìý

  • the date when the account of that transfer is delivered.Ìý

Issue of a clearance certificate (IHTM40010) is not required.Ìý

DiscoveryÌý

Discovery or reporting of the transfer takes place byÌý

  • delivery of an accountÌý

  • compliance with an information notice (IHTM32191) orÌý

  • the Board바카라 사이트™s issue of a Notice of Determination (NOD) (IHTM37001).Ìý

Time limitÌý

The earlier transfer must not be more than ten years before the later transfer.Ìý

No account for later transferÌý

Where no account of the later transfer was requiredÌýthe account is treated as having been delivered. The date of satisfaction will be twelve months after the end of the month in which the transfer was made. The tax paid on the transfer is deemedÌýto be nil.Ìý

ExemptionsÌý

Any allocation of a limited exemption (such as annual exemption (IHTM14141) made in charging tax on a later transfer is not to be disturbed when the earlier transfer is discovered. The effect is that none of the annual exemption may be diverted from the later to the earlier transfer.Ìý

This does not apply where:Ìý

Before 6 April 2025Ìý

  • no tax was chargeable on the later gift, orÌý

  • the exemption is unlimited, such as transfers to the domiciledspouseÌýor civil partner (IHTM11032).Ìý

After 6 April 2025Ìý

  • no tax was chargeable on the later gift, orÌý

  • the exemption is unlimited, such as transfers to the long-term UK resident spouse or civil partner (IHTM47000).Ìý

Interest on taxÌý

The special rule in these cases is that you charge interestÌý

  • by reference only to the tax which would have been payable if the transfer had been reported at the proper time, up to a date six months after discovery of the transferÌý

  • and then by reference to the enhanced amount of tax for any later period.Ìý

Two or more earlier transfersÌý

If the transfers are both discovered late,Ìý

  • the surcharge of underpaid tax on the later transfer is apportioned between the earlier transfers.Ìý

If one transfer (the settled transfer) is discovered, tax and a surcharge levied on it which is accepted in full satisfaction, before discovery of the second earlier transferÌý

  • no further tax is to be charged on the settled transfer as a result ofÌýthe later discovery, butÌý

  • the tax then shown to be underpaid, less the amount already surcharged on the settled transfer, is to be charged on the later discovered transfer.Ìý

ExampleÌý

Adam dies on 1 January 2010Ìý

Adam바카라 사이트™s death estate is £444,000. The account is delivered on time.Ìý

Payment for tax of £47,600 is accepted in full satisfaction.Ìý

An account for a lifetime transfer of £150,000 (after deduction of £6,000 annual exemptions) in Feb 2009 is delivered late.Ìý

Tax directly on the Feb 2009 transfer = NilÌý

Surcharge of additionalÌýtax due on the later transfer (death) is (£444,000 + £150,000 - £325,000 x 40% =) £107,600 - £47,600 tax paid = £60,000Ìý

Total tax to pay on Feb 2009 transfer = £60,000Ìý

Payment is accepted in full satisfaction.Ìý

Two accounts are then received late for further lifetime transfers ofÌý

  • £200,000 in Dec 2008, andÌý

  • £215,000 in Jan 2009Ìý

The charge on the Feb 2009 transfer and death estate are undisturbed. The annual exemption remainsÌýallocatedÌýsolely to the February 2009 transfer.Ìý

  • Tax directly on the Dec 2008 transfer is nilÌý

  • Tax directly on the Jan 2009 transfer is £36,000Ìý

You calculate the surcharge of additionalÌýtax on the later transfers as:Ìý

Total tax due on Feb 2009 transfer and death estate = £237,600Ìý

Less tax paid -£47,600Ìý

Less previousÌýsurcharge -£60,000Ìý

Tax due = £130,000Ìý

This is apportioned:Ìý

(£200,000 ÷£415,000) x £130,000 = £62,650 to the Dec 2008 transferÌý

(£215,000 ÷ £415,000) x £130,000 = £67,350 to the Jan 2009 transfer, in addition to the £36,000 tax.