IHT and CGT Flashcards
Does the Red Book contain guidance on IHT
Yes, it is included in VPGA15 of the Red Book UK National Supplement
What is the primary IHT Legislation
Inheritance tax act 1984
What section is the definition of MV included in
Section 160
Definition of MV
Price of property if sold on the open market at the date of death excluding an impact of the whole estate being put on the market
What is prudent lotting
Selling the estate in lots that would maximise the proceeds of sale
What is a joint tenancy
Tenants own joint equal rights in the whole property. Upon death the deceased’s interest passes onto the survivors in what is known as survivorship
What is a tenancy in common
An undivided share where 2 or more people with distinct different shares. When disposing of a share the other trustees must be consulted. Tenancy in common now known as a trust of sale and a trust of land
Name key case law
Duke of Buccleuch v IRC (Prudent lotting) Ellesmere v IRC (best value) White and Moss v IRC (undivided share) Clay v IRC (Special purchaser)
What is the taxable threshold
£325,000
What percentage of the estate is taxed
40%
Name exemptions to IHT
Estates under £325,000
Gifts over 7 years
Gifts to charities
Transfer to spouse
What is the primary Capital Tax Legislation
Taxation of Chargeable Gains 1992
Where is the definition of market value contained for capital tax
Section 272 of the TCG 1992
What is Capital Gains Tax
Tax on the gain made from the disposal of an asset
What are the tax rates for capital gains tax
18-28% for residential property
10-20% for non-residential property
What is the taxable threshold for capital gains
Gains of over £12,300
How is capital tax calculated
Gain made on an asset which has been adjusted for indexation
What is rebasing
In capital taxation it is assumed any asset held at 31 March 1982 has been sold and immediately reacquired at its market value on that date. The effect is that any gain are attributed to that period since then
Where is the definition of agricultural value contained for IHT
S115(3) of the Inheritance Tax Act 1984
What is the definition of agricultural value for inheritance tax
The agricultural value of any agricultural property shall be taken to be the value which would be the value of the property if the property were subject to a perpetual covenant prohibiting its use otherwise than as agricultural property
What were the 3 main findings of the Antrobus case
1) The restriction is unrelated to occupation or use of any particular agricultural land and is related to the occupier’s employment in agriculture “in the locality”.
2) the planning condition includes as acceptable occupiers those “last working” in agriculture and their widows and widowers
3) an OAC can be removed by the grant of planning permission.
What is a permitted area
An area falling under private residence relief for capital gains tax purposes. This area is under 0.5 hectares with anything over having to be of appurtenance to the reasonable enjoyment of the property and within the same curtilage.
What is a undivided share
A share in a property where there is no defined portion
What type of land does permitted area apply to
Applies to garden and grounds
How many estates are taxed per year for IHT
only around 3%
For IHT what occurs if there is a mortgage on the property
Only charged for the amount owned
How would you adjust for a tenancy in common?
10% additional to an arithmetical share. 15% for any property where a trustee has the right to occupy
What is hope value?
The potential value which could be achieved in the future. For example the impact that planning permission can have if granted for a site
What is a gift?
Anything which involves money, property and possessions
What was the principle outlined in IRC V Crossman
A property must be valued under IHTA84/S160 as if it remained subject to the charge in the hands of the purchaser. In other words, the value of the property must reflect the charge which was encountered in the hands of the purchaser.
What is the Crossman principle?
Hypothetical sale of the property must consider any restrictions that have been placed on the sale as if they would still apply when the premises is sold on
What is the nil rate band?
The amount up to which an estate does not have to pay council tax (£325,000)
What is a PET?
Potentially exempt transfer. These are transfers that could be potentially exempt after 7 years.
What is transferable nil rate band
Transferable is when a nil rate band of £325,000 is transferred to the spouse therefore making the taxable threshold equal to £650,000
What is the deemed acquisition date for CGT?
31st March 1982, which is the rebasing date
What is the difference between MV for red book valuations and MV for CGT & IHT
Capital tax MV does not account for the flooding of the market and also accounts for special purchasers
Are expenses and finance on expenses deducted from CGT?
Yes
What is fall in value relief?
Value of gifted property has fallen in value since the date of transfer. The amount the asset has fallen will be added onto your capital gain allowance
What is annual tax on enveloped dwellings? (ATED)
Form of taxation for the purchase of domestic dwellings through a commercial company
Why is a joint tenancy an arithmetical half share whilst a tenancy in common has an additional adjustment of 10-15%
To reflect the encumbrance of disposing of a tenancy in common as other shareholders will need to agree to the disposal of the specific interest. Whilst a joint tenancy can be disposed of easily due to the survivorship principle.
What are the thresholds for residential SDLT?
01-JUL-2021 £500,000
30-SEP-2021 £250,000
01-OCT-2021 £125,000
What is the threshold for commercial SDLT?
£150,000
What type of relief is there for SDLT?
First time buyers for purchases under £500,000
Multiple dwelling relief for multiple property purchase
What are the typical rates for SDLT?
2% £1250,000-£250,000
5% £250,000-£925,000
10% £925,000-£1.5mil
12% £1.5 mil+
