IHT and business exemption relief Flashcards
What are PETs?
A transfer of value made by a person during their lifetime to another individual.
What is an LCT?
An LCT is a transfer of value made by a person into a trust during their lifetime on or after 22 March 2006.
What is the relevant value of a lifetime transfer?
The amount by which the transferor’s estate is reduced, rather than the face value of the asset or the amount the transferee gains.
For example, if the transferor gives away one item out of a complete set, the loss to the transferor may be more than the value of the one item given away.
What is the value of the transfer on death?
Property in the taxable estate is valued at the price it might reasonably be expected to fetch if sold on the open market immediately before the death.
What is the current NRB?
£325,000
What is the RNRB?
£175,000
What is the death and lifetime tax rate?
20% on lifetime and 40% on death.
What is the cumulative total?
The total chargeable value of all the chargeable transfers made in the previous seven years.
What exemptions are available on death and lifetime?
- Spouse exemption
- Charity exemption
- Business Property Relief
- Agricultural property relief
- political party exemption
- Exemptions for gifts for national purposes or heritage maintenance funds
- Exemption for gifts to EBT’s
- Exemptions for gifts to housing associations
What is BPR?
BPR is an exemption which applies to qualifying business assets.
What are `qualifying business assets’ for BPR purposes?
*A business or interest in a business
*Shares in an unquoted company
*Shares in a quoted company
*Land or buildings, machinery or plant owned by the transferor but used for business purposes by either a company of which the transferor has control, or a partnership of which the transferor was a partner.
What are the conditions for the BPR to apply?
The transferor must have owned the business assets for at least two years immediately prior to the transfer.
What property does BPR not apply to?
It is not available if the business consists wholly or mainly for making or holding investments.
The transferor must have owned the business assets for at least two years immediately prior to the transfer.
What rate of relief is available for BPR?
100% Relief is available in respect of transfers of a business or interest in a business or shares in an unquoted company e.g. 100% relief applies to all private company shares irrespective of the size of the shareholding.
50% applies to shares in a quoted company but only if the shareholder had control of the company and to the land or buildings category.
What happens when BPR is used on a lifetime transfer but needs to be reassessed on death?
BPR will only be available when reassessing the transfer if the property transferred still qualifies for BPR in the transferee’s hands when the transferor dies.
