Pensions: treatment of alternatively secured pensions from 6 April 2007: example where IHT due first - charge on relevant dependant’s death
The scheme member dies and leaves an estate of £300,000, equivalent to the current NRB. The value of the funds in their ASP is £200,000 and within 6 months of the death these funds are paid to a relevant dependant. Thus a charge does not arise under IHTA84/S151A IHTM17404).
The relevant dependant dies the next year when the ASP funds are worth £150,000 and the IHT NRB has risen to £312,000. No unauthorised payment has been made before the tax on the dependant’s death is due so the ASP is fully charged to IHT.
The NRB in point is that applicable on the dependant’s death, so whereas at the scheme member’s death there would have been no surplus NRB to set against the ASP, there is now £12,000 unused. This is grossed up using the formula in (IHTM17407) to £40,000, so the tax on the ASP funds (£150,000 - £40,000) x 40%) = £44,000. To get COMPASS to produce the right result, you should
- add a new entry to the case record at the scheme member’s file,
- select the ‘stats’ title ‘ASP fund chargeable on dependant’s death’
- include the value of the ASP after deducting the grossed up NRB at £110,000
- include the NRB applicable at the dependant’s death in the ‘Aggregate chargeable estate’ box.
As at IHTM17408, you should write to the scheme administrator to explain the figures included on the calculation.