IHTM45038 | Reduced rate for gifts to charity: merger of components: datacapture on COMPASS

Where an estate includes a charitable legacy, the application of the reduced rate will affect the datacapture for COMPASS as it will be necessary to separate the estate into its components. This happens already with Free Estate and settled property as different people are liable for the tax: the most noticeable difference will be that joint property passing by survivorship will now need to be shown as a separate entry.

Where an election is made to merge components, the election is for the purposes of the 10% test, it does not alter where the liability for IHT falls. So even if the result of the election is that all the components of an estate qualify for the reduced rate, you should keep the individual components separate on COMPASS.

The only exception to this rule would be where the taxpayers file an election to merge survivorship property with the general component on delivery of the form IHT400. Where this occurs, and assuming the 10% test is met for the merged component, the survivorship property can be datacaptured under Entry A as the personal representatives are liable for the tax arising as a result of the death on ‘unsettled’ property (IHTM30022).

It is possible that the option to merge components will only be viable after an Instrument of Variation (IHTM35011) has been executed to increase the amount that is passing to charity. Again, if the merger is of the general and survivorship components and the 10% test is met for the merged component, you may, if it is more convenient, alter the COMPASS record so that both components are included under Entry A.