3. Inheritance Tax Flashcards
How are life assurance policies written in trust for a named beneficiary treated for IHT purposes?
They are NOT included in the estate for IHT purposes
A life assurance policy payable to the estate WOULD be included for IHT purposes
How is joint property treated for IHT purposes?
It is included in the estate for IHT purposes (however, just the share would be considered, i.e. half)
How does the valuation principle apply to jointly owned land?
To allow for difficulty selling a share, value may be discounted 10% for commercial building and 15% for residential property for IHT purposes (if spousal exemption doesn’t apply)
What are the relevant exemptions on death?
Spouse or civil partner exemption
Charity exemption
Business property relief
Agricultural property relief
If the transferee is domiciled in the UK but the transferor is not, what is the limit on the spousal exemption?
£325,00
What reduction is available on the transfer of unquoted shares?
100%
What reduction is available on the transfer of quoted shares?
50% IF transferor had voting control (50%+ of the votes) of company immediately before transfer
What are the relevant time limits for BPR?
Must have been owned for at least 2 years at the time of transfer
What is agricultural property relief?
Reduction of 100% allowed where transferor had right to vacant possession immediately before the transfer or where the property was subject to a letting commencing on or after 1 September 1995
Reduction of 50% allowed in other cases
When is the residence nil rate band applicable?
Where there is a “qualifying residential interest” i.e. house which was at some time deceased’s residence and forms part of the estate
This is “closely inherited” i.e. passing to direct descendent / current spouse or CP / widow of direct descendent (unless remarried)
What are the lifetime only exemptions available?
£3,000 each tax year with ability to carry one year forward
Small gifts of £250 or less to any one person in a tax year
Gifts in consideration of marriage - £5,000 by parent, £2,500 by remoter ancestor, £1,000 in any other case
What is the difference between PETs and LCTs?
PETs = transfer to a person
LCTs = transfer to trust/ company
If a PET was made within 7 years prior to death, what LCTs need to also be considered in cumulation?
Any LCTs made within the 7 years of making the PETs need to be taken into account
What are the deductions for tapering relief?
3-4 years = 80%
4-5 years = 60%
5-6 years = 40%
6-7 years = 20%
If IHT was paid on an LCT at the time, what happens on death?
IHT rate in lifetime would have been 20% - this is taken off the new calculation (which is 40% and considers cumulation and any PETs)
