IHTM35156 | IHT implications of an Instrument of Variation: increased tax as result of instrument executed on or after 1 August 2002

If a variation increases the amount of tax payable in an estate the parties to the variation (or any one of them) must deliver a copy of the instrument to the office dealing with the estate and notify it of the amount of additional tax. Under IHTA84/S218A this must be done within 6 months of its execution (IHTM10850). Anyone who fails to comply with the requirements of IHTA84/S218A may become liable to a penalty under IHTA84/S245A (IHTM36091).

If the variation does not increase the amount of tax that is payable there is no statutory obligation to submit the instrument. Where we receive a variation such as this on an excepted estate or a sub threshold case return the instrument to the taxpayer with a covering letter explaining the revised provisions.

But where the variation decreases the amount of tax payable in the estate, the relevant parties will almost certainly submit the variation as part of their claim for repayment. The requirement to deliver a copy of the instrument within 6 months of execution does not apply in these circumstances.

If an instrument which results in additional tax is received outside the time limit but is otherwise valid then you should consider whether a penalty (IHTM36091) is due for late delivery.