Question 1

What is the statutory basis for capital gains tax?

Accepted Answer

The Taxation of Chargeable Gains Act 1992

Question 2

What is the statutory basis for IHT?

Accepted Answer

Inheritance Tax Act 1984

Question 3

What is the statutory basis for SDLT?

Accepted Answer

The Finance Act 2003

Question 4

What is the basis of value for IHT and CGT?

Accepted Answer

Market value defined as: The value the property is expected to sell for if sold on the open market. The price is not assumed to be reduced on the grounds that the whole property is to be placed on the market at the same time. I.e flooding the market

Question 5

How does the basis for CGT and IHT differ from market value?

Accepted Answer

For IHT/CGT the value of the properties are not assumed to be reduced because the market has been flooded.

Question 6

What did the Duke of Buccleuch case set out?

Accepted Answer

Large estates should be ‘prudently lot’ to achieve the best possible price for the property.

Question 7

What did the Lady Fox case set out? (3 key points)

Accepted Answer

That the property must be valued as it actually existed at the date of valuation. Even if a prudent seller would likely make some changes or alterations to the property before putting it up for sale. Thirdly the property is assumed to be capable for sale in the open market even if in reality there are restrictions on sale that prevent it from being the case. E.P.R Existed. Prudent. Restrictions.

Question 8

Where is the definition of market value for IHT found?

Accepted Answer

Section 160 IHT Act 1984

Question 9

What is UK VPGA 15?

Accepted Answer

Replaces UKGN3 Provides an overview of the statutory basis of market value for IHT, CGT, SDLT and ATED.

Question 10

What is ATED?

Accepted Answer

Annual tax on enveloped dwellings ATED is an annual tax payable mainly by companies that own UK residential property over £500k

Question 11

What is inheritance tax?

Accepted Answer

This taxes the transfer of assets on death and those made during life, in particular this includes gifts made within the last seven years of life.

Question 12

What is the date of valuation for IHT?

Accepted Answer

The moment before death. This was designed to ensure interests that terminate on death are treated as part of the estate.

Question 13

What is the IHT threshold?

Accepted Answer

£325,000

Question 14

What is the tax rate for IHT?

Accepted Answer

40%

Question 15

What is the nil rate band for IHT?

Accepted Answer

The value of an estate that is not subject to IHT (under £325,000).

Question 16

Can the nil rate band for IHT be transferred?

Accepted Answer

Yes, if your estate is being inherited by your spouse or partner they inherit your nil rate band. This means that when they die they can leave an estate worth £650,000 that’s free from inheritance tax.

Question 17

When is the standard 40% rate used in IHT?

Accepted Answer

On amounts over £325,000

Question 18

What reliefs are available for IHT?

Accepted Answer

Quick succession relief - this is to prevent estates being decimated by successive beneficiaries dying within a short time of each other. Agricultural and Woodland relief Business property relief Fall is in value relief - where the transfer occurs at a high point in the market and after this date a sale occurs at a lower value. Essentially the relief applies for sales within three years of death. Actual sale is substituted from value at date of death.

Question 19

What is exempt from IHT?

Accepted Answer

Foreign properties owned by a person living abroad Transfers between husband and wife or between civil partners are exempt. This applies to both lifetime and death transfers Annual exemption of £3,000 for lifetime transfers Outright gifts of up to £250 to any one person are exempt Lifetime transfers as wedding gifts Transfers to charities

Question 20

Why did HMRC instruct you to value at 1982?

Accepted Answer

Valuing as at 31st March 1982 as instructed in The Finance Act 1988. The reason behind the rebase is that the 1970s saw significant inflation in the UK and it was deemed to be unfair to tax people on the growth in the value of their assets that was simply due to increases in general prices.

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Capital Taxation Flashcards

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