12. IHT - the charge Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

When is IHT charged?

A

Chargeable transfer (s.1)

  • which is a transfer of value (s.2)
  • which is a disposition decreasing the value of the transferor’s estate (s.3(1))

Must be gratuitous - s.10
Charge = 20% (and 20% again if die)
BUT MOST lifetime transfer = PET (not charged unless die within 7 years)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

On death

A

deemed transfer of value (s.4)

of all the property deceased was beneficially entitled to immediately before death (s.5)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

PETs

A

no charge straight away

if donor dies –> PET becomes chargeable as a lifetime transfer but at death rates (subject to taper relief)

Asset must become part of donee’s estate or increase value (e.g. paying off bills)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Value of TOV

A

value by which estate of donor decreases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

RATES

A
0% = BELOW £325,000
40% = amounts above £325,000

(36% if 10% of net value given to charity)

Lifetime: 20% immediately (when above nil rate band, looking back 7 years) and 20% again on death (if 7 years die)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Sch.8A

A

Transfer of nil rate band

  • when spouse B dies, spouse B can use the % of unused nil rate band of Spouse A
  • e.g. if Spouse A did not use 80%, B gets 80% of the current nil rate band in addition to B’s own nil rate band
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Family home allowance

A

from 2017-18 (to 2020-21)

  • £100,000 p/p
  • increasing to £175k in 2020-21
  • increase with inflation after 2020-21
  • phased out for estates over £2mn
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Who is liable to IHT?

A

PARTIES CAN CHOOSE
if no receipt, Revenue follows legislation

LCT = transferor primarily liability
Additional LCT + PET = transferee
ON DEATH = PR primary liable (s.200)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Revenue Charte for unpaid tax

A

s.237(1) - charge for unpaid tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Effect of GWR (s.102 FA 1986)

A

Property treated as remaining in A’s estate immediatly before death regardless of when gift was made = IHT

worse than PET (if 7 years = no charge)
might be CGT too (unless PPRR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When does GWR apply?

A

DISPOSAL by way of gift (narrower than TOV)
& either
ONE - at or before relevant period no BF possession/enjoyment of donee

TWO - during relevant period property not enjoyed at entire exclusion of donor or virtually entire exclusion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

RI55

A

Virtually entire exclusion = ambit is obscure
- might be a de minimise view

ROB applies

  • staying weekends
  • second home both use
  • house w/ lib donor uses
  • car which donor uses every day

ROB doesn’t apply

  • 2 weeks holiday home alone (or 4 weeks w/donee)
  • baby sitting
  • social visists
  • occasional use of car
  • temp short-term stays
  • using land to walk dog/horse-riding
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Sillars v IRC

A

GWR

- not enjoyed at virtually entire exclusion because Donee had a share only and had no power (not entire exclusion)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

ingram v IRC

A

Gave donee a freehold already subject to a 20 year lease

  • avoided s.102
  • not reservation, carved out before giving lease
  • in property law, “house” is not a legal entity, only have a right in property which can be altered
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

s.102A

A

Now Ingram would fail

  • if individual disposes of interest in land
  • and enjoys significant right/interest in land
  • s.102(3)/(4) applies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

IRC v Eversden

A

s. 102 doesn’t apply if transfer is an exempt transfer
- so here, gift to spouse = s.18 exempt transfer
- doesn’t matter that interest returned to donor
- no s.102

17
Q

s.102(5A)-(5C)

A

Eversden won’t work now
- if conditions satisfied, original disposal is treated as being made immediately after ending of spouse’s interest in possession

18
Q

Pre-owned asset regime effect

A

income tax levied on donor

but s.21 - T can elect back to GWR treatment

19
Q

LAND (POAR)

A

ONE - Occupation (incl. enjoyment)

TWO - disposal condition or contribution condition satisfied

20
Q

annual exemption

A

s.19 - £3000

21
Q

small gifts to the same person

A

s.10 - £250 each year (no rollover)

de minimis excemption
GWR doesn’t qualify for this

22
Q

normal expenditure out of income

A

s.21 - encourages disposing of assets during lifetime but mostly helps wealthy people

ONE - part of normal expenditure
TWO - out of income
THREE - transferor left with sufficient income after tax to maintain usual standard of licing

23
Q

Bennet v IRC

A

S.21 normal expenditure out of income

NEED NOT DO TWICE TO ESTABLISH REGULARITY

  • done once and expected to do again = sufficient to establish regularity
  • no standard of reasonableness and tax planning motive is no obstacle
24
Q

McDowall v IRC

A

SUBSTANTIAL GIFTS made during lifetime
- attorney made gifts on deceased’s behalf by power of attorney during last years of life

ATTORNEY HAD NO POWER TO MAKE GIFTS
but if gifts were valid = s.21

25
Q

Gifts made in consideration of marriage

A
s.22 - must be in consideration of new status to fall within exemption 
parent = £5000
remote ancestor = £2500
parties = £2500
others = £1000
26
Q

Holland v IRC

A

Cohabitation is not marriage

27
Q

Business Property Relief

A

ONE - owned by donor during previous 2 years
TWO - not property subject to binding contract for sale

if relevant business property
qualifying business
held for two years
asset not expected asset

RELIEF = 100% OR 50% depending on type of asset

28
Q

George & Anor

A

ORIGINALLY: to decide if investment or trading company look at amount of time spent on each one

NOW: a better test it to look at what the company looks like overall

29
Q

Clark & Anor

A

company mostly holding investments

NOT BPR

30
Q

Arnander & R&C

A

agricultural property

  • purpose of occupation must be agricultural operations
  • here agricultural activities contracted out
  • house larger than necessary for agricultural purposes
31
Q

quick succession relief

A

if B’s estate increases by chargeable transfer
& B dies within 5 years

tax chargeable on B’s death = reduced by % of tax paid re:1st transfer

  • 100% for death within 1 year
  • 20% drop a year