IHT Flashcards
IHT is?
What are the two main chargeable occasions?
A tax on gifts or transfers of value
Lifetime transfers and death estate
Who is chargeable to IHT?
Individuals and Trustees
What are the exceptions to the IHT charge?
Transfers where there was no gratuitous intent - Selling a painting for £1,000 when it was worth £100,000
Transfers made in the cours eof trade )gifts to staff)
Expenditure on family maintenance (school fees paid for child)
Waivers of renumeration
Waivers of dividends (provided the Waiver is made within 12 months of dividend declared).
What are the Exempt transfers for Lifetime transfers?
Small gifts - up to £250 per donee per tax year. If gifts total more, entire amount is taxable.
Normal expenditure out of income - Leaves donor with sifficient icome to maintain lifestyle
Gifts in consideration of marriage - £5,000 if parent
£2,500 if remote ancestor or one of the parties
£1,000 any other person
IHT is a tax on
Capital, not revenue
Annual exeptions
The first £3,000 of a transfer of value (not covered by another exemption) which is transferred in a tax year is exempt.
Any unused AE is carried forward for one tax year only and can only be used after the current tax years AE
Transfers to UK X and X are exempt
Charities and qualifying political parties and museums and art galleries
What makes a political party qualifying?
At least two members were elected at the house of commons
OR
One member was elected and polled at least 150,000 votes
Chargeable lifetime transfers
They are gifts to a trust and are chargable at the point of the gift. If the donor dies within 7 years there may be further. IHT due on death.
Exemptions should always be used on
CLT’s first
PET’s (Potentially Exempt Transfers)
Any other gifts. Exempt from Lifetime IHT. If donor dies 7 years or more after PET was made, its exempt.
What is the rate of tax on CLT’s?
25% if donor pays IHT
20% of trustees pay IHT
IHT for lifetime transfers on death is due by
the donee
RNRB
The residence nil rate band is available if:
Individual dies on or after 6th April 2017
Owned a home which they lived in (main residence)
Main residence passes to direct decendents children or grand children (not nieces or nephews)
The available RNRB is
The lower of:
£175,000 plus any remaining spouses RNRB
The value of the residence
The RNRB is tapered if
The NET estate exceeds 2million.
Tapered by £1 for every £2 over the threshold
What is the net estate?
Value of all assets less liabilities
Transfers of RNRB and NRB can be claimed up to
Within 2 years of the month of the death of the survivor
Relief for fall in value of lifetime gifts
Fall in value relief -
If an asset is gifted during lifetime and either:
MV at death is lower than original
Before donors death is sold at arms length for less than original value
The donee can make a claim for the death IHT on the lifetime gift is based on the lower value.
When calculating the NRB though, the original value must be used.
Valuation rules - Property
The IHT value of any property is the open market value at the time of the transfer
Quoted shares and securities are valued at the
Lower of:
1/4 up the lower bid of the two closing prices + 1/4 of the difference between this and the higher offer price
OR
Average of highest and lowest marked bargains
Ajustment for ex dividends need to be included within the death estate
As there is no easy way to value unquoted shares and securities
The taxpayer must come to an agreement with HMRC
Units in an authorised business trust are valued at
The managers bid price ( the lower of the two published prices)
Life policies
If they mature on death, the amounts due to be paid are included within the death estate