CH22 - IHT Flashcards
Transfer value basis
Loss to donor usually open market value, unless shares
Chargeable persons
All UK domiciled people
What gets charged
the value of all of the net assets in the individual’s estate at the date of death
any lifetime gifts made in the seven years before death, provided they are not exempt transfers.
Certain lifetime gifts at date of gift
Gifts into trusts
These are all chargeable lifetime transfers, it is not exempt or a potentially exempt transfer
How PETs work
If donor dies within 7 years, then it is chargeable
Small gift exemption
£250 per recipient per year (totality)
Further exemption: ‘Normal’ gifts
If not a transfer of capital wealth e.g. payment of a grandchilds school fees or payments into life insurance policy for a child
Annual Exemption
First £3k of transfers, doesn’t matter if there is a PET, it uses it up anyway
Can carry forward one year only.
Marriage exemption
£5k by a parent
£2.5k by grand parent or remote ancestor
£2.5k from the other party
£1k from anyone else
Marriage has to take place
Inter-spouse exemption
FULLY
Proforma Lifetime IHT on a CLT
Value of estate before transfer X
Value of estate after transfer (X)
=Transfer Value X
Less: full exemptions (spouse) (X)
Less: Specific exemptions
- Marriage exemptions (X)
- Annual exemptions (always last) (X)
=Chargeable Amount X
Payment of lifetime IHT date
If CLT date 6 April - 30 Sept = 30 April following year
If 1 Oct - 5 April = Six months after the EOM of CLT
If donee pays the tax
Gross gift = 20% tax
If donor pays the tax
Value of estate reduces by value of gift and tax payable 25%
Actual Proforma for IHT gift tax
Transfer value
Less:
AE PY £3k
AE CY £3k
= Chargeable Amount
Less NRB - £325k
Taxable amount
IHT Payable - 20% trustee, 25% donor
Gross chargeable amount = same as CA, but increases by tax paid if donor pays
