Local man saves £145,000 tax and keeps home

A local man, whose father died fighting in the Second World War, has avoided a £145,000 tax bill – thanks to ground-breaking work by a Warwickshire firm of solicitors.

The local man, who wishes to remain anonymous, will not have to pay any inheritance tax (IHT) on his late mother’s estate – saving him a potential £145,000 tax bill and allowing him to stay in the home he shared with his mother for 25 years.

Coventry and Warwickshire law firm Alsters Kelley successfully applied to HM Revenue & Customs to transfer the unused nil-rate tax band of his late father, who died in action during World War II with no assets or Will, to his late mother’s estate.

The pioneering work saw Alsters Kelley take advantage of a change to legislation made by the Chancellor Alistair Darling in October 2007, which means that transfers of the unused proportion of the nil-rate band of the first spouse to die can be claimed by executors of the surviving spouse, regardless of when their husband or wife died.

Neil Raiseborough, partner and estates and tax specialist at Alsters Kelley, managed the case and said the saving worked on the principle that if the first spouse to die did not use up their entire inheritance tax or estate duty allowance, it could automatically transfer to the survivor.

"This gentleman’s father was killed in action towards the end of the Second World War. Taking advantage of recent legislation change, his unused nil-rate band was transferred to his widow,” he explained.

"Our client had always lived with his mother who had sought specialist advice some years ago about mitigating inheritance tax. We had advised her to transfer half of her house to him at that time and, so long as he continued to live with her and she survived more than seven years from the date of the gift, the half-share transferred would not be taxable.

"When our client’s mother sadly passed away, our client was faced with a potential tax bill of £145,000 and the prospect of selling the family home he still lived in to pay that bill.

"However, because of the family’s long-standing relationship with Alsters Kelley and the specialist advice they had received on planning for the future, together with recent changes allowing for the transfer of the unused nil-rate band, we were successful in both our applications to HM Revenue & Customs to wipe the potential tax bill out altogether.”