Chapter 15 Inheritance tax - basics

Question 1

When is a chargeable lifetime transfer (CLT) chargeable and what are the tax %s

Answer 1

At the time the gift is made:
If Donor pays tax - 25% on net transfer
If Donee pays tax - 20% on gross transfer

At the time of death:
Only if CLT < 7 before death
Donee pays 40% less tax paid in lifetime

Question 2

When is a Potentially Exempt Transfer (PET) chargeable to inheritance tax?

What is the rate of tax?

Answer 2

Only if the donor dies withing 7 years of making the PET.

40% tax (subject to tapering relief)

Question 3

What 3 transfers are exempt for both lifetime gifts and the death estate?

Answer 3

1. Donors spouse/civil partner
2. Charity
3. Qualifying political party

Question 4

How do you know if a lifetime gift is a PET or a CLT?

Answer 4

It’s about who receives the gift:

• CLTs are gifts to trusts
• PETs are gifts to individuals

Question 5

How much is the annual exempt amount?

What are the rules regarding prior year AEA?

How does it get applied?

Answer 5

3k

Unused prior year AEA can be B/F

Applied to CLTs and PETs in chronological order but NOT on death estate

Question 6

Who are related parties

Answer 6

Any property owned by:

• Spouse
• charity or political party
• may affect valuation

Question 7

Quoted shares value (IHT Purpose)

Answer 7

Lower of

AVERAGE of marked bargains

Or

Bid price + 1/4 (offer price-bid price)

Question 8

When a spouse dies with out utilising their NRB what does it affect

Answer 8

NRB in the DEATH TAX and DEATH Estate calculation

DEATH TAX first