New Guidance on Transferable Nil-Rate Bands

Posted: 13th May 2011

Cruise Ship 1There has, since its inception, been a great deal of confusion regarding the ‘double Inheritance Tax (IHT) nil rate band’ legislation – whereby the unused proportion of the IHT nil rate band of the first of a couple to die is passed to the second: this is termed the ‘transferable nil rate band’ (TRNB).

One of the problems stems from those cases in which the estate of the first deceased merely passed across to their spouse and the formal documentation relating to the estate was either not prepared or not retained.
HM Revenue and Customs have attempted to make the use of the TRNB simpler by issuing a new code of practice which allows an estate making use of a transferred TRNB to be an ‘excepted estate’ provided certain conditions are met.
In practice, this will simplify the administration of many estates. However, there are still conditions which may cause difficulties for many people, such as the conditions that the first deceased must have:
  • been domiciled for IHT purposes in the UK at the date of death; and
  • not have owned foreign assets (i.e. a holiday home) worth more than £100,000 at the date of death.
The guidance can be found at