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Last updated: 3 Aug 2021
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How to calculate Quick Succession Relief (QSR) for estate administration

When an estate includes assets recently inherited the question arises of whether QSR may apply. Calculating the potential relief available adds further complexity. Below, we outline the calculation to support you with estate administration.
What is Quick Succession Relief (QSR)?

What is Quick Succession Relief (QSR)?

If the death estate of an individual includes an asset that was recently inherited by them, it’s possible that Inheritance tax (IHT) will be paid twice on the same asset, in a short period of time. QSR is available to reduce the IHT liability where an individual’s estate has increased in the five years before death, by a transfer which itself gave rise to an IHT liability. QSR therefore reduces the IHT liability on the recipient’s death.

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Richard Pott

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pottr@buzzacott.co.uk

What is Quick Succession Relief (QSR)?

If the death estate of an individual includes an asset that was recently inherited by them, it’s possible that Inheritance tax (IHT) will be paid twice on the same asset, in a short period of time. QSR is available to reduce the IHT liability where an individual’s estate has increased in the five years before death, by a transfer which itself gave rise to an IHT liability. QSR therefore reduces the IHT liability on the recipient’s death.

How to calculate QSR

How to calculate QSR

After any exemptions and the available nil rate band (NRB) (£0 - £325,000) have been deducted from the death estate, IHT is charged at a rate of 40%. QSR is then applied to reduce the tax liability, and is calculated using the following formula:

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IHT paid previously is the amount of inheritance tax paid on the original transfer, this is then multiplied by the relevant percentage.

The % depends on the number of years between the date of the transfer to the recipient and their death:

  • 100% if death was within one year of the original transfer
  • 80% within two years
  • 60% within three years
  • 40% within four years
  • 20% within five years

Increase in estate is the amount the recipient’s estate is increased by because of the original transfer. Increase in estate + IHT paid previously is that same figure plus the IHT paid in respect of that transfer.

Example

Mr Jones inherited an asset valued at £100,000 in January 2021. 40% IHT was charged in respect of the asset. This increased the value of Mr Jones estate from £3,500,000 to £3,600,000 as the IHT was payable by the executors. 

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The IHT liability on Mr Jones’s estate will therefore be reduced by QSR of £28,571.

It’s likely that the estate you are administrating is far more complex than the above and there are other factors to consider when it comes to QSR, so we recommend seeking professional advice if you’re looking to make a QSR claim to ensure the correct tax is paid.

Tax-free or tax-bearing?

Tax-free or tax-bearing?

The Quick Succession Relief calculation differs depending on whether the original gift was tax-free or tax-bearing. A tax-free gift is one where the recipient did not pay the inheritance tax due on the transfer, i.e. where the tax was paid from the residue of the estate. A tax-bearing gift is one where the recipient was liable for the IHT on transfer; which will in turn reduce the increase in the value of their estate as a result of the transfer.

In effect, the QSR available will be larger if the original gift was tax-free as opposed to tax-bearing, as there would also be a greater increase in the recipient’s estate. 

The above example is on the basis that the IHT was not payable by the recipient, which would be the case where the will does not specify the tax is to be paid by the beneficiary. Below is the example where the IHT was payable by the recipient.

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What if the inherited asset has been disposed of?

What if the inherited asset has been disposed of?

There’s no requirement to still own the asset at the date of death. The only requirements are for the original transfer to have been chargeable to inheritance tax, and for the value of the recipient’s estate to have increased as a result of the chargeable transfer.

Speak to an expert
Speak to an expert

For professional advice on administering an estate, determining whether a QSR claim is possible and how to make the claim, please fill in the form below and one of our experts will be in touch to discuss how we can help.

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