On an application for first registration the registrar must, under rule 35(1) of the Land Registration Rules 2003, enter notice in the register of any interest which appears from their examination of title to affect the registered estate. This includes notice of a charge for any inheritance tax (IHT) (or interest on the tax) which might be due.
Where tax on a chargeable transfer (or interest on the tax) is unpaid, HM Revenue and Customs is entitled to a charge (‘IHT charge’) on any property comprised in the estate. Where a property forming part of the estate is transferred for value then the property is not transferred subject to the IHT charge; however, where the property is assented or gifted (that is, not for valuable consideration) then it passes to the recipient subject to the IHT charge.
The registrar must make an appropriate entry in the charges register on first registration if, from evidence of the applicant’s title supplied, it appears to them that the land may be liable to a subsisting IHT charge.
There may be circumstances where an IHT liability arises, even if the value of the deceased’s estate is below the maximum exempt threshold; the registrar is not in a position to know what percentage of any exempt threshold may have been used up or transferred, or what other circumstances (for example, a deed of variation of a will, or gift with a reservation) might have affected the tax position.
Situations where the IHT charge may arise
When the property passes on a death
If (a) the property has not been sold since the donor died; (b) the death occurred within six years of the date of the application; and (c) the net value of the donor’s estate shown in the probate or letters of administration exceeds the current inheritance tax threshold.
When the donor of a lifetime gift died within seven years of making the gift
When it is known that (a) the donor of a lifetime gift died within seven years of making the gift; (b) the property has not been sold within eight years of the date of the application; (c) the gift was made within eight years of the application; and (d) the value of the property is in excess of the current inheritance tax threshold.
An IHT charge is protectable by registration of a D(i) land charge and where such a registration exists we will make the following register entry on first registration of the property unless evidence of discharge is supplied:
Land Charges registration number [….] dated [date] protecting a Land Charge Class D(i) in respect of inheritance tax against [Name]. No further particulars were supplied on first registration.
Where the application for first registration is not founded on a disposition for value, for example, an assent or transfer by way of gift, we therefore have to consider whether there may be any liability for IHT, irrespective of any land charge registration.
If it appears from the application that the property may be subject to an IHT charge, we will write to the customer asking for written confirmation that either no IHT was ever payable, or that it has been paid in full. Alternatively, the customer can lodge written confirmation of this provided by HM Revenue and Customs.
Applicants for first registration can avoid an entry being made in the register or a requisition on this point by providing the requisite evidence that either the land charge has been cancelled, or that inheritance tax is not payable or has been paid in full.