2c. Capital Tax - inheritance Tax: Lifetime Gifts

Question 1

Business property relief
1. Available on what
2. What qualifies to be 100% relief & 50% relief
3. Must be in what type of business
4. Held for how long
5. What would be 100% relief
6. For companies with investments what’s the BPR restriction calc

Answer 1

1. Lifetime gifts and death estate
2. @ 100%
   - unincorporated business
   - unquoted AIM shares (no minimum holding)
   - unquoted securities over 50% interest
   50%:
   - quoted shares & securities > 50% interest
   - individual assets in a business for company/ partnerships NOT sole trader business
3. Trade ( @ death too)
4. At least 2 years unless AIM
5. Business Assets / total assets

Question 2

Agricultural property relief
1. Available on what
2. Two key conditions
Available on
- agricultural value of agricultural property in UK & EEA
- held for minimum period of
If owner occupied farm=
If tenanted farm =
3. Rate of relief
4. What’s given first APR or BPR

Answer 2

1. Lifetime gifts and death estate
2. Owner occupies = 2 years
   Tenanted farm = 7 years
3. Usually 100%
4. Apr then bpr

Question 3

What’s the rate of tax on lifetime IHT payable if the following pays
- donor
- donee/ trustee

Answer 3

• 25%
• 20%

Question 4

Describe the specific exemptions deducted from transfer value
1. Spouse
- amount
- max amount if spouse non uk dom
2. Charity
- amount
3. Political party
4. Small gifts
- amount per year
5. Gifts to married couples
- parent gifting amount
- grandparent amount
- anyone else
6. Normal expense out of income

Answer 4

1. Spouse
   - unlimited amount
   - non uk dom = max £325k)
2. Charity
   - unlimited amount
3. Political party
4. Small gifts
   - less than £250 per year
5. Gifts to married couples
   - parent = 5k
   - grandparent= 2.5
   - anyone else = 1k
6. Normal expense out of income
   - doesn’t effect standard of living
   - regular payments
   - out of income not capital

Question 5

Step 1 - Lifetime gifts , inheritance tax - CLT

(1) less : APR/BPR RELIEF
(2) less : value of estate after gift
(3) value of estate before gift
(4) specific exemption
(5) annual exemption
(6) IHT payable 20/25%
(7) NRB available after deducted CLTs in the past 7 years
(8) gross chargeable amount

Answer 5

(3) value of estate before gift
(2) less: value of estate after gift
= TRANSFER OF VALUE
(1) less: APR/BPR relief
(4) specific exemption
(5) annual exemption
= NET CHARGEABLE AMOUNT
(7) NRB available
= TAXABLE AMOUNT
(6) IHT payable
(8) gross chargeable amount

Question 6

Step 1 - Lifetime gifts , inheritance tax -
PET

(1) less : APR/BPR RELIEF
(2) less : value of estate after gift
(3) value of estate before gift
(4) specific exemption
(5) annual exemption

Answer 6

(3) value of estate before gift
(2) less: value of estate after gift
= TRANSFER VALUE
(1) less : APR/ BPR relief
(4) less: specific exemption
= GROSS CHARGEABLE AMOUNT

Question 7

Step 2 - IHT payable on lifetime gifts at death - CLT & PET

(1) less: fall in value relief
(2) CGT from step 1
(3) less: Taper relief
(4) less: NRB = 325k + Spouse transfer - any PET / CLT less than 7 years of death
(5) IHT @ 40%
(6) less: IHT paid in lifetime
(7) IHT payable

Answer 7

(2) CGT from step 1
(1) less: fall in value relief
= REVISED CHARGEABLE AMOUNT
(4) less: NRB available
= TAXABLE AMOUNT
(5) IHT @ 40%
(3) less: Taper relief
(6) less: IHT paid in lifetime
(7) IHT Payable

Question 8

Step 1 lifetime gift
Diminution in value concept = loss to diner
Special rules apply for:
- related party
- shares
Related property
= prosper if a similar kind held by apps/ charity / political party
Applies to
= unquoted shares
= collections of chattels
= adjacent plots of land

Calculate the value , if:

Shares=

If other assets other than shares=

Answer 8

= value of combined assets x A / (A+B)

Shares
Value of combined assets
X
No. Of shares held by indv /
(No. Of shares held by indv + no. Of shares held by related party

Other assets
A= MV of individuals assets
B= MV of related party’s assets