ExpertMedium2 marksMultiple Choice
ACCA · Question 30 · Inheritance tax
Section B - Case 3 (Oakfield Farms)
Arthur's estate on death was valued at £1.8 million. He left his entire estate to his children. He had downsized from a large family home to a smaller cottage two years before his death, freeing up cash.
Can Arthur's estate claim the Residence Nil Rate Band (RNRB) downsizing addition?
Section B - Case 3 (Oakfield Farms)
Arthur's estate on death was valued at £1.8 million. He left his entire estate to his children. He had downsized from a large family home to a smaller cottage two years before his death, freeing up cash.
Can Arthur's estate claim the Residence Nil Rate Band (RNRB) downsizing addition?
Answer options:
A.
No, because the RNRB only applies to the property actually owned at death.
B.
No, because his estate is over £1 million.
C.
Yes, because he downsized after 8 July 2015 and left assets to direct descendants.
D.
Yes, but only if the new cottage is worth more than £175,000.
How to approach this question
Check the conditions for the RNRB downsizing addition: downsizing occurred on or after 8 July 2015, and assets of an equivalent value are left to direct descendants.
Full Answer
C.Yes, because he downsized after 8 July 2015 and left assets to direct descendants.✓ Correct
The Residence Nil Rate Band (RNRB) includes a 'downsizing addition'. This allows an estate to still benefit from the full RNRB if the deceased downsized to a less valuable home (or sold their home) on or after 8 July 2015, provided that other assets of an equivalent value are left to direct descendants (children/grandchildren). Since Arthur's estate is £1.8m, it is below the £2m taper threshold, so the full RNRB (including downsizing addition) is available.
Common mistakes
Thinking the RNRB is lost entirely if the final home is worth less than £175,000.
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