Nick Crabbe, a financial planner and director with Leeds financial planning firm Manse Capital has been talking to HMRC about whether the new Residence Nil Rate Band is transferable and this is the response he received from Danka Wigley in it’s IHT Policy Unit.
‘Thank you for your query about the transfer of the new residence nil-rate band (RNRB).
The RNRB will be transferable where the surviving spouse of a married couple, or the civil partner in a civil partnership, dies on or after 6 April 2017 irrespective of when the first of the couple died. This means that even if the late spouse or civil partner died some time ago when there was no entitlement to the new RNRB, the estate of the surviving spouse or civil partner will be able to benefit from the unused allowance. In such cases, the whole of the unused RNRB can be transferred.
The transfer of the new RNRB will work in a similar way to the transfer of the existing nil-rate band. So for married couples and civil partners, if the RNRB is not entirely used on the first death, the unused proportion can be transferred to the surviving spouse or civil partner’s estate to be used on their death if the qualifying conditions are met. The amount that can be transferred to the surviving spouse or civil partner’s estate will be determined by the date of their death. For example, if the surviving spouse dies in 2020-21 and the whole of the unused RNRB from a late spouse is transferred, the maximum available RNRB would be £350,000 (2 x £175,000), not just £275,000 (i.e. £175,000 + £100,000).
I understand that there has been some confusion about the amount of RNRB that is available for transfer, and that the interpretation of the legislation by some advisors has not always been correct. Although new section 8G(4) refers to £100,000 this does not mean that that is the amount which is transferred to the surviving spouse’s estate. Where the first of a couple died before 6 April 2017, both the amount available for carry forward (i.e. transfer) and the RNRB at the time of the first death (the residential enhancement) is deemed to be £100,000 ensuring that the relevant proportion of the unused RNRB to be transferred is 100%. The RNRB for the surviving spouse’s estate is therefore increased by 100% on the second death (subject to the taper).
I hope this explains the position.’