IHT

Question 1

Legal Personal Representative

Answer 1

Responsible for payment of tax of the estate within 6 months after end of month in which occurs

Grant of representation cannot be issued until accounts delivered and iht paid

Question 2

Normal expenditure out of income

Answer 2

Has to be regular but not necessarily the same amount
As long as doesn’t reduce donor’s standard of living
Money must come from income
Excludes capital content of PLA and withdrawals from an investment bond

Question 3

Spousal exemption

Answer 3

Ltd to 325k for non domiciled spouse
Unless elect to be treated as uk domiciled for iht purposes
Election can be made during lifetime
Irrevocable whilst remain uk resident
If outside uk 4+ consecutive yrs, ceases to apply
Can apply from any date within previous 7 years
This covers previous gifts, earliest date 6 4 2013
Election after death within 2 years made by personal reps

Question 4

Exempt transfers

Answer 4

Spousal 
Education & maintenance 
UK charities 
UK political parties 
Death as a result of active service

Question 5

RNRB

Answer 5

150k 19/20
Increase with CPI
Available if main residence left to direct descendant
Available if downsized/ceased to own home after 7 7 15 and left assets of an equivalent value to a direct descendant
Transferable if unused to spouse cp if second death after 6 4 17
Irrelevant when first death occurred
Estates over 2m reduce by £1 for every £2 over 2m threshold

Question 6

Lifetime Tax due

Answer 6

Due 6 months after end of month CLT made
Unless between 5th April and 1st October, then due by 30th April in following year

PET/CLT failed, any extra due paid by recipient within 6 months after end month death occurs

Question 7

14 yr rule

Answer 7

Donor dies within 7 years of making a CLT
Tax at death rate (40%)applies retrospectively to that transfer
Tax recalculated using value of gift and previous 7 years cumulation at date of transfer
This may bring earlier transfers back into play

Question 8

Business relief

Answer 8

Relief for transfers of business property owned at least 2 years before transfer
Not applicable if business property subject to a binding contract at time of transfer
100% BR for unincorporated businesses or share holdings in unquoted/AIM Co
50% for controlling share holdings in listed Co, land, buildings, plant machinery

Question 9

Agricultural Relief

Answer 9

Land crops buildings (not animals or equipment-usually qualifies for BR)
100% relief for owner occupied farm
50% relief for landlord let farmland - increases to 100% if tenancy more than 12 months
Owned 2 years (or 7 if let out)
If AR and BR apply AR given first

Question 10

Post mortem relief

Answer 10

Shares sold within 12 month death
Or property sold within 4 years
Sold less than valuation on death
Iht can be calculated on disposal proceeds

Question 11

Quick Succession Relief

Answer 11

Available if inherit and die within 5 years
Part value deemed to consist of inheritance that iht was paid
Relief only applies to net increase in the estate of the second person

Formula

Tax paid on first t-fer X net t-fer
Divided by 
Gross transfer 
X
Relevant % (in tax table)

Question 12

Intestacy

Answer 12

If die intestate then estate distributed to relatives of deceased based on surviving relatives;

1. Spouse/CP - entitled to all
2. Spouse/CP AND Children-

SP/CP - has personal Chattels, First 250k of estate and 50% of the remaining estate entirely

Children have remaining 50% absolutely.
If below age 18 estate held in trust on their behalf until 18 or marry

3. No Spouse/CP

Children take estate absolutely
No children then;
Grandchildren take place of parents…
Parents…
Brothers and sisters (their children if deceased)
Grandparents in equal shares
Uncle and aunts (their children if deceased)

4. No relatives

The crown takes the whole estate

Question 13

Deed of Variation

Answer 13

IHT planning tool
Allows alteration of an inheritance
Within 2 years of death
Can be used to skip a generation and pass directly to grandchildren so doesn’t worsen an existing iht issue

Key features;

• only beneficiary who will inherit less needs to agree
• if variation for iht purposes must be written statement
• doesn’t need to have been a Will, inheritance by virtue of intestacy can still be varied
• variation must be made in 2 years of death,
• in writing
• signed by affected beneficiaries
• if more iht payable then executors or admin need to sign/agree variation
• should state how estate originally distributed and how being varied and who will benefit
• an estate can only be varied once

Question 14

Holdover Relief (CGT / IHT)

Answer 14

Applies to CLT for IHT if settlor doesn’t have interest
No CGT payable immediately
Deferred
Donee’s acquisition cost reduced by held over gain thus increases size of gain
CGT payable when donee disposes of asset
Has to be claimed jointly by donor and donee
Available for gifts of business assets

Question 15

NRB

Answer 15

Amount at 0%
Can transfer unused % to SP/CP
Transferred NRB only useable on death (cannot be used on gifts made in lifetime)