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Wills > IHT > Flashcards

IHT Flashcards

1
Q

IHT calculation for transfer on death

A
  1. transfer - anything in estate, survivorship or beneficially entitled. nothing written in trust for someone else
  2. value - market value. discount jointly owned property Deduct debts / liabilities/expenses
  3. reliefs / exemptions - nil rate band 325k, RNRB 175K, business relief, charity relief, spouses, agricultural relief
  4. calculate tax NRB (consider 7yrs previous and anything unused by spouse) and then 40% remainder or 36% if 10% of net estate goes to charity
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2
Q

IHT calculation for PET

A

1 transfer - anything individual to individual or into disabled trust. not for maintenance or education of child or dependent

  1. value - market rate. related property rule applies
  2. reliefs / exemptions - business, agriculture, charity, spouse, small gifts 250, normal expenditure, marriage, annual exemption 3k or max 6k
  3. rest is PET but chargeable is dies within 7 years
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3
Q

marriage exemption amounts

A

parents 5k
remoter ancestors 2.5k
anyone else 1k

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4
Q

impact of business relief if original owner dies within 7 years

A

if new owner no longer owns it then business relief is revoked but if they still own it then no impact
or if the new owner dies before original owner must own item on the new owners death

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5
Q

IHT calculation for LCT

A

1 transfer - into company or trust (not disabled trust) anything that isn’t a PET
2 value - market rate
3. exemptions reliefs - same as PET - no small gifts relief
4. calculate NRB (consider LCT in past 7 yrs but not PET) Rest taxed at 20%

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6
Q

when does RNRB not apply

A

not applicable to PET or LCT

not if estate value is too high - reduce by £1 for every £2 over 2m

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7
Q

Effect of death on PET

A

consider removing business rate relief
calculate NRB - PET that become chargeable and LCT in 7 years before transfer in question
tax at 20%
Apply tapering relief

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8
Q

tapering relief

A 
1-2: 100%
2-3:100%
3-4:80%
4-5:60%
5-6:40%
6-7 years : pay 20% of charge
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9
Q

effect of death of LCT

A

recalculate if die within 7 years of transfer
consider removing business relief
calculate NRB (consider chargeable PET and LCT within 7 years of transfer in question)
tax at 20% - use lower rate if different at time of death and time of transfer
apply tapering relief
give credit for any IHT paid at time of transfer

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10
Q

what if IHT on a LCT is lower when recalculated at time of death than it was when paid at time of transfer

A

no refund

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11
Q

what is the estate rate

A

the average rate of tax applicable to each item of property in the estate

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12
Q

how to calculate the estate rate (percentage)

A

total amount of IHT paid / total chargeable estate x100

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13
Q

how to calculate estate rate (amount for item)

A

total amount of IHT paid / total chargeable estate X value of item

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14
Q

who is liable for the IHT on the property in a trust immediately before the death

A

Trustee and anyone in whom the trust property subsequently vests or for whose benefit the property is subsequently applied are concurrently liable

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15
Q

how long do you have until IHT is due

A

IHT is due 6 months after the end of the month of death

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16
Q

can you obtain a grant before paying IHT

A

no - must pay IHT before obtaining a grant

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17
Q

do you pay interest on IHT

A

only if not paid within the 6 months

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18
Q

if IHT is paid in instalments, how many instalments are there and when is the first one due

A

10 instalments

first is due 6 months after the end of the month of death

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19
Q

how to calculate how much IHT is attributable to the instalment property

A

use estate rate

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20
Q

which property is eligible for IHT instalments

A

land
businesses or interest in business
any shares that control company
any unquoted uncontroling shares if they are worth 10% of nominal shares of company and worth 20K or payment in one go would cause hardship
IHT attributable to the shares and any other installment property amounts to at least 20% of the IHT payable on the estate

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21
Q

is interest payable on installments

A

For shares, business property or agricultural land - interest is due only if not paid on time
for all other installment property - interest is payable on outstanding amount of IHT as well as if not paid on time

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22
Q

do the outstanding IHT instalments become due if the instalment property is sold

A

yes all outstanding tax and interest becomes due

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23
Q

how long to pay IHT on a PET

A

6 months after end of month of death

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24
Q

how long to pay LCT

A

if transfer made 5 April - 10 Oct then pay by 30 April following year
if made outside those dates then 6 months after end of month in which LCT is made
additional LCT payable on death due 6 months after end of month of death

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25
Q

who is liable for IHT on death

A

PR and B are concurrently liable

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26
Q

can T decide to change who is liable for IHT on death

A

no - statutory rule is that PR and B are concurrently liable and this cannot be changed
but T can change who bears the burden by making express provision in the will

27
Q

if the will gives a gift subject to tax then who has the burden of the tax

A

the recipeint

28
Q

who is responsible for tax on LCT

A

recipient and trustee are both responsible - if trustee pays it will be less

29
Q

who is responsible for IHT on PET

A

recipient but if they don’t pay within 12 months after end of months of death then PR

30
Q

who is responsible for IHT on property that T gave away during their life but reserved a benefit in which they continued to enjoy until their death

A

recipient but if unpaid within 12 months of end of month of death then PR liable

31
Q

discount for jointly owned land when identifying value of transfer for IHT

A

10% if commercial

15% if residential

32
Q

how to calculate value of shares when identifying value for IHT

A

take 1/4 off difference between lower price and higher price and add that 1/4 to lower price

33
Q

what can be deducted from value of transfer when calculating IHT

A

liabilities owed at time of death and funeral expenses

34
Q

what should be included in the transfer when calculating IHT

A

everything passing through the will
everything T had a beneficial interest in
the capital if T was entitled to all the interest even if only life tenant
not the capital if remainderman and life tenant is still alive
anything passing through survivorship
property subject to a reservation at death (gave away legal ownership subject to retaining possession and enjoyment)
NOT anything written into trust for someone else

35
Q

do spouses pay IHT

A

no

36
Q

do cohabitants benefit from spouse exemption for IHT

A

no

37
Q

does spouses located outside the UK benefit from spouse exemption for IHT

A

yes but it is capped at 325K

38
Q

requirements to be eligible for business property relief

A

must have owned property for 2 years before death (include period owned by deceased spouse unless lifetime transfer)
business must be trading in nature

39
Q

deductions made if business property relief applies

A

100% - business, interest in business, unquoted shares
50% - quoted shares with voting control and land, buildings, plan and machinery owned by T but used in business if T had voting control

40
Q

what is agricultural property relief

A

reduces the agricultural value of the property (the value if the property was only ever allowed to be used for agriculture)
part of value of property above the agricultural value won’t qualify for this relief but may get business relief

41
Q

requirements for agricultural property relief

A

property occupied by T for agricultural purposes for 2 years priori to death or 7 years by someone else for agriculture

42
Q

deductions made if agricultural property relief applies

A

100% if T had right to vacant possession immediately before death or letting after Sept 1995
50% reduction in all other cases

43
Q

can RNRB and NRB be used together

A

yes

44
Q

can RNRB be used on PET or LCT

A

no

45
Q

how much is RNRB

A

£175k

46
Q

when does RNRB apply

A

qualifying dwelling occupied by T at any time, forms part of Ts estate and inherited by close relative (issue, spouse or spouses’ issue)

47
Q

can you claim your spouses RNRB

A

yes surviving spouse claim any unsued RNRB not used by spouse who dies first

48
Q

reduction of RNRB when estate is over £2m - calculation

A

if estate is £2m or more RNRB is reduced by £1 for every £2 over £2m
175,000 - (value of estate - 2m /2) = adjusted RNRB

49
Q

how long to deliver the completed IHT form to HMRC

A

6 months

or 12 months but will incur interest

50
Q

when is an estate excepted from IHT

A

all falls within NRB (can use spouse NRB too)

T was never resident in UK and had limited assets in UK

51
Q

when can T used deceased spouse NRB in addition to their own

A

if their deceased spouses didn’t use any of their NRB but cannot use it if decease spouse used some of it themselves

52
Q

which IHT form is used for an excepted estate

A

IHT205 - send to probate registry

53
Q

which IHT form is used if there is IHT t pay

A

IHT400 send to HMRC

54
Q

which form does HMRC send to probate registry to confirm IHT has been paid so registry can issue grant

A

IHT421

55
Q

how long to submit IHT400 if you wrongly submit IHT205

A

6 months from when you discover that the estate is not excepted from IHT

56
Q

can HMRC insist you submit a IHT400 even if you have submitted IHT205

A

yes within 35 days of issue of grant if they think its not excepted

57
Q

are PRs still liable for installments once the property is transferred to B

A

yes so keep some money back for this

58
Q

what is a corrective account

A

altered account of IHT to HMRC made by PR when all variations are known

59
Q

what is a clearance certificate

A

PR can apply for one from HMRC to confirm all IHT is paid

60
Q

impact of a clearance certificate

A

discharges all people, including PR, from IHT liability unless there is fraud or non-disclosure of material facts

61
Q

what is IHT loss relief

A

when assets are sold for less than their value at date of death loss can reduce IHT liability

62
Q

when can you use IHT loss relief

A

if asset sold within 12 months of death

63
Q

how to use IHT loss relief

A

swap sale price with market price and recalculate IHT

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