IHT

Question 1

What relief is available when business assets pass under a will?

Answer 1

Reduces value of business property given a lifetime gift or on death

• applied before any annual exemption is applied
• 100% relief applies if the donor transfers Soul trade business or partnership interest to the trust or if the donor transfers shares in an unlisted trading company
• 50% relief is available if the donor transfers shares in a quoted trading company if the donor has more than 50% of the company voting shares
• or if the donor transfers land buildings, plant or machinery used either by a partnership of which they are member or accompany they control

Question 2

When does business relief apply?

Answer 2

Automatic if conditions satisfied.
Only if trading

100% relief
- sole trade business or partnership interest owned for at least 2 years before
- shares in private trading company owed for at least 2 years before

50% relief
- shares in quoted trading company if have voting control (50%+)
- land or buildings or plant and machinery owned by and used by company or partnership which they control
Min 2 years ownership

Question 3

When does agriculture relief apply?

Answer 3

Reduces value of assets during lifetime or on death

100%

Includes
- farmer who owns land and uses assets in own business
- landowner who is letting out agricultural land or buildings to a farmsr

Doesn’t include grazing horses or fishing shooting etc

Must own for 2 years proper to transfer, if tenanted land, must own for 7 years prior

Can be used in addition to business relief

Question 4

What happens if estate left to charity?

Answer 4

Lower rate of death tax - 36% if 10% or more of net estate (after exemptions and reliefs applied) left to a charity

Question 5

When does residents nil rate band apply?

Answer 5

£175000 if was at some point residence and left to direct lineal defendants, eg children grandchildren or their spouses. Includes step children and foster.

If estate exceeds £2m, residents NRB tapered away at rate of £1 for every £2 over limit. Eliminated for estates over £2.35m

Question 6

What other reliefs are there on death?

Answer 6

Quick succession relief
- applies where persons estate been in created by chargeable transfer made to them in 5 years before death (eg gift in will or failed PET)
- 20% decreased for each year between donor and recipients death

Question 7

What are anti avoidance rules?

Answer 7

Gifts with reservation of benefit
- if still receive benefit, will be treated as part of estate at death.
- doesn’t apply if pay market rent
- if release benefit before death eg move out, not part of estate however HMRC view as a PET so if die within 7 years chargeable

Question 8

Who pays IHT? And when?

Answer 8

CLTs
- payable at 6 months from end of month made or 30 April after tax year, whatever is later
- paid by donor 25% or trustee 20%
- additional tax on death due 6 months after end of month death, burden on trustee. PRs may be liable if remains unpaid 12 months after death

PETs
- none due when made
- if chargeable, 6 months after end of month od death
- recipient liable and suffers burden
- if not paid for 12 months, PRs may be liable

Transfers on death
- 6 months after month when died
- if freehold estate PRs liable, burden on residue
- interest in property, if held in trust, trustees liable, burden on trust assets
- if gifts with reservation of benefit - recipient liable
- outside will, PRs liable but beneficiaries suffer burden

Question 9

What order are reliefs and exemptions applied to lifetime transfers?

Answer 9

Reliefs first - eg business and agricultural relief, spousal relief, charity etc applied first

Then take off annual exemption