IHT- residence nil-rate band downsizing provisions in draft Finance Bill 2016

IHT- residence nil-rate band downsizing provisions in draft Finance Bill 2016

Fri 18 Dec 2015

The progress of the additional nil-rate band for residences has been rather slow and tortuous: first the basics of Residence nil-rate band (RNRB) were set out in the Summer Budget and Finance (No.2) Act 2015 but at that time nothing was said about downsizing provisions except that there would be some.

The Draft Finance Bill 2016 provisions implement the changes announced in October which outlined the downsizing rules that were not included in the original legislation. The new sections to be introduced to IHTA 1984 relate to:

  • downsizing where property owned on death is of lower value than the residence disposed of on or after 8 July 2015;
  • downsizing where the deceased had no residential property on death;
  • computational provision where the home passes to direct descendants;
  • computational provision where the home does not pass to direct descendants;
  • computational provision relating to RNRB lost due to downsizing.

Future guidance

The provisions are too dense and convoluted for reasonable coverage to be attempted in this article and are still in draft form. Furthermore, they only affect deaths on or after 6 April 2017.

If this is an area of concern to you please contact Chris Williams.

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