Pensions: treatment of alternatively secured pensions from 6 April 2007: changes to procedures for charge under IHTA84/S151A
Where the charge arises under IHTA84/S151A the procedures outlined in (IHTM17370) continue to apply with the following amendments
- where the scheme administrator delivers form IHT105, you can issue closure letter SL124A, as no tax will be payable.
- a recapture charge may arise when the relevant dependant dies or ceases to qualify as a relevant dependant (IHTM17354). We will need to review files for these future claims as set out at (IHTM17373).
- where the scheme administrator delivers form IHT100 & 100g (IHTM17353) you should assess the tax in the normal way, but as a top-slice charge.
Where the chargeable value of the deceased’s estate, ignoring the ASP, exceeds the NRB, the calculation is straightforward - the ASP funds will simply bear tax at 40%. You should create a new entry on COMPASS and select the ‘stats’ title ‘ASP fund chargeable from 6 April 2007’.
Enter the date of the deceased’s death as the Date of Transfer/Event. You should show the remainder of the chargeable estate on death in the ‘Aggregate chargeable estate’ box (what is the PLCT box on ‘normal’ calculations). Unless there are any valuation issues with the ASP funds, the liability will be settled without reference to the remainder of the estate, so you can issue closure letter SL124A for the ASP charge, once the tax has been paid.
- the chargeable value of the deceased’s estate, ignoring the ASP is less than the NRB, and
- the IHT charge arises before the UP charge,
we need to reflect the interaction of the pensions’ tax charge and the IHT charge in our calculations. This is achieved by grossing up the unused NRB. There are some examples of the calculations required at (IHTM17407) onwards.
The scheme administrator is unlikely to know what the size of the deceased’s estate is. All they will know for certain is that they have leftover ASP funds which are liable to IHT. Where the funds are paid out in such a way as to give rise to an ASP charge, they should deliver form IHT100 & 100g. Once the IHT400 for the estate has been received, you will know whether there is any used NRB and, if so, gross it up.
If the value of the ASP is significantly below the grossed up value of the unused NRB and the deceased’s estate is at least £25,000 below the NRB, you can issue closure letter SL124A for both the estate and the ASP.
Where, however, the estate is within £25,000 threshold - so that there is a risk that amendments may exhaust the unused NRB and thus make the ASP funds taxable - you should consider the nature of the estate and whether any significant amendments are likely. Where you conclude that there may be such amendments, you should open the file and review for the changes. You will then need to let the scheme administrator know what the position is and that the tax position cannot yet be settled.
Once the position of the estate is settled, you can assess and collect any tax that is due, then issue SL124A and close the file once the tax is paid.