IHTM46065 - Downsizing calculations: where there is no residential property interest in the estate: how to calculate the lost relievable amount

Where the person has disposed of a residential property interest (IHTM46011) in their lifetime and there is no residential property interest in their estate at death the calculation of the lost relievable amount (IHTM46062) is provided by IHTA84/S8FE(10). The lost relievable amount is calculated using the following steps:

Step 1 - Work out the person’s ‘former allowance’. This is broadly the RNRB that would have been available when the disposal took place, but with some adjustments.

This figure is made up of:

  • the residential enhancement (IHTM46022) that applied at the date of disposal, plus
  • any brought-forward allowance (IHTM46040) that would have been available at the date of disposal, plus
  • if the brought-forward allowance at the date of death is greater than the brought-forward allowance at the date of disposal, the difference between these two values.

The total of these three values is the person’s ‘former allowance’.

If the disposal occurred between 8 July 2015 and 5 April 2017 (IHTM46021) the figure for the residential enhancement is treated as being £100,000 in accordance with IHTA84/S8FE(6)(a). There would not have been any brought-forward allowance available at that time, so this value will be nil in accordance with IHTA84/S8FE(6)(b). But any brought-forward allowance at the date of death is nevertheless added to the residential enhancement (see example 3 at IHTM46066).

Step 2 - Express the value of the person’s QFRI (IHTM46053) as a percentage of the person’s ‘former allowance’ (the value from step 1 above). This percentage is capped at 100% if it would otherwise be higher.

Step 3 - Multiply the person’s allowance on death (their default or adjusted allowance (IHTM46026) by the percentage at step 2. This value is the person’s ‘lost relievable amount’

The actual downsizing addition is the lower of:

  • the person’s ‘lost relievable amount’ from Step 3, and
  • the value of the property or assets which are closely inherited (IHTM46052).