4 - Inheritance Tax (F & G) Flashcards
F Valuation of the transfer G Liability to inheritance tax
When gifts are made between ‘connected persons’, such as parents and their children or grandchildren, the donor is treated as having made the disposal at what value?
Full market value
When someone dies holding assets that stand at a gain, the assets are liable to IHT or CGT?
IHT - they benefit from a ‘tax-free uplift’ to the value which applied at the date of death, also known as ‘rebasing’
How are legal costs treated when valuing property for IHT?
If donor pays the cost, they are ignored, but if the recipient pays the cost, they reduce the value of the transfer
Where a chargeable transfer also results in a CGT liability, which is paid by the recipient, how is the reduction in value calculated?
IHT is reduced by the amount of CGT paid
How is relief given when a deceased’s estate includes listed shares or authorised unit trust holdings, which are sold within a year of the death at a lower value than the value at the date of death?
Relief is given by recalculating the tax on the basis of the actual sale value of all the sold shares
If the sale of land to unconnected persons within three, sometimes four, years of the death, makes a loss, a relief is available but only if the loss is how much?
Either £1,000 or 5% of the death value, whichever is the lowest
What is related property?
Related property is property that is either
a) in the estate of a spouse or;
b) settlement in which the donor or spouse or civil partner has an interest in possession
Which is worth more; a controlling or minority shareholding for IHT valuation purposes?
Controlling
Which transfers have to be grossed up?
Lifetime transfers in which the transferor pays the tax
The tax payable when transfers are grossed up is, what, in excess over the nil rate band?
One-quarter of the excess
“Example: A net gift is made of £350,000. The tax is calculated as follows:
One quarter of the excess over £325,000 (NRB) = ¼ × £25,000 (Excess) = £6,250.
The tax is thus £6,250, making a gross transfer of £356,250, which is the figure that will be carried forward for future cumulation.”
When is IHT due to be paid?
Usually due six months after the end of the month in which the death occurred
Which comes first; payment of IHT or Grant of Probate?
IHT. It will normally have to be paid before probabte can be issued.
Who is liable to pay the IHT on a lifetime PET where the donor didn’t survive 7 years?
Recipient of gift (or trustees if in a trust)
For CLTs that exceed the nil rate band in any seven year period, lifetime IHT is due 6 months after the transfer unless the transfer was between which dates?
6 April and 30 September - if this is the case, it won’t be then due until the end of the following 30 April
Tax payable on the estate of a deceased person is the liability of who?
Legal personal representatives (LPRs)
