Capital Taxation

Question 1

Principle legislation for Inheritance tax?

Answer 1

S.160 Inheritance Tax Act 1984

Question 2

What does s.160 of IHT Act 84 define?

Answer 2

Market value for purposes of valuation.

Question 3

What is inheritance tax?

Answer 3

The tax on an estate (property, money and possessions) of someone who’s died.

Question 4

What does s.4 of IHT Act 84 tell us?

Answer 4

To value ‘immediately before death’.

Question 5

What are the IHT rates of tax?

Answer 5

Taxable amount above threshold: 40% standard or 36% on some assets if 10% or more of net value left to charity.

Question 6

What is the ‘Net Value’ of estate in IHT

Answer 6

Estate total less any debts.

Question 7

When is IHT payable and what is the interest rate?

Answer 7

6 months after transfer of funds.

Interest paid on unpaid funds at 7.75% or 4.25% on payments.

Question 8

Which section of UK Supplement covers IHT, GCT, SDLT and ATED?

Answer 8

UK VPGA 15

Question 9

What does UK VPGA 15 cover in the National Supplement?

Answer 9

IHT, CGT, STLD, ATED.

Question 10

What is Annual Tax on Enveloped Dwellings (ATED)?

Answer 10

Annual tax payable mainly by companies that own UK residential property valued more than £500,000.

Question 11

When is a ATED return to HMRC required for a property?

Answer 11

When the property is a dwelling, is in the UK, is valued at more than the specified threshold.

Question 12

Inheritance Tax Reliefs

Answer 12

B - Business
L - Loss on Sale
A - Agricultural
C - Charity

Question 13

Inheritance Tax Exemptions

Answer 13

Nil-Transferable-Residence, Annual PET-Charity, Political-Parties-Marriage

Nil Rate Band (NRB)
Transferable Nil Rate Band (TNRB)
Residence Nil Rate Band (RNRB)
Annual exemptions
Potentially Exempt Transfers (PET)
Charity gifts
Political Party gifts
Marriage/Civil partnerships

Question 14

What does the UK VPGA 15 say on IHT, CGT and SDLT?

Answer 14

Valuations are based on statutory definition of market value which may differ from RED Book definition in VPS 4. This is because it is subject to interpretation by the Upper Tribunal (Lands Chamber).

Question 15

Where can the basis of value for IHT, CGT, SDLT and ATED be found in the UK supplement?

Answer 15

UK VPGA 15.2

Gives relevant sections of the respective legislation.

Question 16

Where can you find the basis of value for Inheritance Tax?

Answer 16

s.160 of the Inheritance Tax Act 1984

Question 17

Where can you find the basis of value for Capital Gains Tax?

Answer 17

s.272 of the Taxation of Chargeable Gains Act 1992

Question 18

Where can you find the basis of value for Stamp Duty Land Tax

Answer 18

s.118 of the Finance Act 2003

Question 19

Where can you find the basis of value for the Annual Tax on Enveloped Dwellings?

Answer 19

s.98(8) of the Finance Act 2013

Question 20

Meaning of market value for SDLT?

Answer 20

s.118 of act: ‘shall be determined as for the purposes of the Taxation of Chargeable Gains Act 1992’

Question 21

Meaning of market value for CGT?

Answer 21

s.272 of TCGA 1992: price property might reasonably be expected to fetch if sold on the open market, but not reduced on the ground that the whole property is placed on the market as one and at the same time (flooding of the market).

Question 22

What is meant by flooding the market?

Answer 22

An excess amount of assets for sale causing an undesired drop in value.

Question 23

Meaning of market value for IHT?

Answer 23

s.160 of IHTA 84: price property might reasonably be expected to fetch if sold on the open market,
but not reduced on the ground that the whole of the property is placed on the market at one and the same time (flooding of the market).

Question 24

Meaning of market value for ATED?

Answer 24

s.98(8) of Act: ‘is to be determined as for the purposes of TCGA 1992’.

Question 25

How does the statutory definition of market value differ from the RED Book?

Answer 25

Ignores special purchaser

Question 26

What are the UK VPGA 15 Market Value assumptions

Answer 26

• Sale is hypothetical
• Vendor is hypothetical
• Purchaser is hypothetical, prudent and willing
• Vendor would divide property into natural lots to achieve the best overall price
• All preliminary arrangements prior to sale carried out prior to valuation date
• Property offered on open market by whichever method of sale that achieves best price
• Adequate publicity or advertisement so that it is brought to attention to all likely purchasers
• Valuation should reflect bid of any special purchaser in the market (providing they are willing and able to purchase)

Question 27

What is the purpose of UK VGPA 15?

Answer 27

Provides guidance to valuers who furnish valuation advice to clients reporting in accordance with UK capital taxation requirements.

Question 28

What does UK VPGA 15 cover?

Answer 28

• IHT
• CGT
• SDLT
• ATED

Question 29

What is a special purchaser?

Answer 29

A buyer for whom a particular asset has a special value because of advantages arising from its ownership what would not be available to other buyers in the market.

Question 30

What is ‘special value’?

Answer 30

An amount that reflects particular attributes of an asset that are only of value to a special purchaser.

Question 31

What is capital gains tax?

Answer 31

Tax on the profit when you sell (dispose) of an asset thats increased in value. It is the gain that is taxed, not the total money recieved.

Question 32

What is private residence relief?

Answer 32

S.222 of Taxation of Chargable Gains Act 1992