IHT

Question 1

Explain the formula used to calculate somebody’s Periodic charge on a CLT

Answer 1

1. Take the excess over the Nil rate band and multiply by 20%
2. Then take that number and multiply it by 30%
   Answer is the periodic charge

Question 2

Explain the formula for calculating somebody’s ‘effective rate’ on their periodic and exit charges

Answer 2

1. Periodic Charge / Value of Trust (or Pie divide by Vegetables!)
2. Multiply by 100
   Answer is the effective rate!

Question 3

Explain the calculation to apply the effective rate to find the exact amount of a periodic charge

Answer 3

1. Value of Trust or value of distribution
   mutiply by
2. Number of quarters since last CLT divide by 40
   multiply by
3. The effective rate

Question 4

When do you include a CLT for IHT calculations when it was made more than 7 years prior to death?

Answer 4

If it is within 7 years of a PET or another CLT

Question 5

What effect does a CLT have on calculations when it was made more than 7 years ago?

Answer 5

It reduces the NRB for subsequent gifts, however when calculating the final tax the reduced NRB is ignored

Question 6

What is the formula used for quick succession relief?

Answer 6

1. Gross Estate Minus Tax paid
2. Divided by Gross Estate
3. Multiplied by tax paid
   Then multiply that figure by % of QSR