IHT - Death Estate Flashcards

Question

What reliefs are available on death only?

Answer 1

Woodlands relief Quick succession relief

Answer 2

Spouse Charity BPR APR Political party exemption Exemptions for gifts for national purposes / to heritage maintenance funds Exemption for gifts to EBTs Exemptions for gifts to housing associations

Answer 3

Gifts between spouses during life and following death are completely exempt – no upper limit Does not matter why spouse inherits – relief applies to value of assets received under a will, intestacy, survivorship or any combination Not for unmarried couples – no concept of a common law spouse Gift may be conditional provided the condition is satisfied within 12 months of death Applies if spouse receives life interest – but not the remainder interest

Answer 4

All transfers to registered charities during life / following death are exempt, provided that they are used exclusively for charitable purposes Charity must be in jurisdiction If deceased leaves at least 10% of their estate to charity - reduced IHT rate of 36% may be available

Answer 5

Party must EITHER have at least two MPs elected, or one MP elected and at least 150,000 votes given to candidates representing that party

Answer 6

Deceased must have owned qualifying business assets for the qualifying period of time

Answer 7

All private company shares, regardless of size or value of shareholding Listed shares, only if the taxpayer controls the company (50%+) Business interest or interest in a business - sole trader / partnership interest Assets owned by taxpayer, but used for business

Answer 8

Unquoted shares - 100% Quoted shares - 50% Business / interest in a business - 100% Assets owned by taxpayer but used for business purposes - 50%

Answer 9

Investment assets: when the business concerned consists wholly or mainly of dealing in securities, stocks, shares, land, buildings, or making / holding investments

Answer 10

Transferor must have owned the business assets continuously for at least 2 years prior to the relevant transfer Exceptions: Qualifying assets sold and replaced with new qualifying assets Inheriting business assets after death - deemed to acquire on date of death [same holds for inheriting business assets following death of spouse]

Answer 11

BPR is only available for the lifetime transfer if the qualifying property transferred is a) Owned by the transferee b) Qualifies for BPR when the transferor dies c) No minimum ownership requirement

Answer 12

Reduces IHT payable on agricultural value of qualifying assets

Answer 13

Must have owned qualifying assets, for the qualifying period Qualifying agricultural property: Land and buildings, used for purposes connected with agricultural activity. Farmhouses and cottages may qualify if they are of a character "appropriate" to the associated agricultural land and have been occupied for the purposes of agriculture. Qualifying period of ownership: Occupied for agricultural purposes throughout the two years immediately before the transfer [BPR time period exceptions apply here]

Answer 14

100% relief if transferor was the owner / occupier or property was let on a tenancy beginning on or after 1 September 1995 50% relief – tenancies created before September 1995 If someone purchases a farm and occupies it for farming purposes  property will qualify for APR after two years of occupation – 100% If someone purchases a farm and lets it out - property will qualify for APR after 7 years of occupation – 100%

Answer 15

If qualifying property transferred is a) owned by the transferee, b) qualifies for APR when the transferor dies, c) no minimum ownership requirement of 2 years for the transferee

Answer 16

APR is given priority if both rates would apply You cannot claim BPR on a business asset if it also qualifies for APR Livestock - no APR, but BPR Farmhouses - no BPR, but APR

Answer 17

Deceased must have owned the woodlands for at least 5 years if they bought it themselves If inherited - relief applicable immediately Essentially a deferral, as tax will be paid on value of timber when sold or gifted Calculated as value of trees, and not the value of the land itself.

Answer 18

IHT relief which reduces tax bill when assets are inherited more than once in a short period of time. Prevents assets being taxed multiple times in rapid succession.

Answer 19

Death estate includes assets received by way of gift / inheritance In 5 years before death Those assets were subject to an IHT charge when transferred to deceased If death occurs within one year of iHT charge - relief is calculated with reference to 100% of the amount of IHT paid previously % based reduction in amount of IHT, depending how many years afterwards. Within 1 year 100% 1 – 2 years 80% 2 – 3 years 60% 3 – 4 years 40% 4 – 5 years 20% Over 5 years 0%

Answer 20

12 months from the end of the month in which the death occurred

Answer 21

6 months from the end of the month in which death occurred - after which interest becomes payable on the unpaid tax

Answer 22

IHT on some assets can be paid by 10 equal annual instalments. First instalment paid on the usual deadline of 6 months from the end of the month in which death occurred Each instalment afterwards is paid on the anniversary of the deadline each year Interest is paid on any IHT which remains outstanding after the first deadline date.

Answer 23

Land and buildings Company shares / securities giving the deceased control Some unquoted shares / securities where a) payment cannot be made without undue hardship b) tax attributable to shares represents 20% or more of the total tax for which the PRs are liable c) value of shares is greater than £20,000 and the shareholding represents at least. 10% of the nominal value of all the company shares Farms / interest in a farming business Business / interest in a business Timber

Answer 24

Option to pay in instalments ceases. Outstanding IHT due immediately, and sale proceeds are available to meet this liability.

Answer 25

One which does not have to pay IHT because it meets certain conditions

Answer 26

Gross value of the estate is below the NRB - and any TNRB from spouse - NOT RNRB Gross value is total taxable estate, plus chargeable transfers made in 7 years pre-death, and specified exempt transfers

Answer 27

The deceased's estate is passing entirely to a surviving spouse or civil partner, or to a charity. Even if the estate is worth more than £325,000, no IHT is due due to these exemptions. If passing to a spouse, they must be UK domiciled. Value of the estate must be less than £3 million.

Answer 28

No - only spouse or charitable relief can

Answer 29

If deceased made a gift with reservation of benefit that subsists at death – or the reservation ended in the 7 years prior to death, and transfer was not exempt Estate includes either more than one trust interest, or a single trust interest worth over £250,000 (which is not passing to spouse) Foreign assets worth more than £100,000 Value of specified transfers exceeds £250,000 Claim for RNRB is made – claim for this would accompany the IHT400

Answer 30

They must correct any errors using the corrective account form C4. Inform HMRC about additional assets / liabilities, corrections to value of assets / liabilities, exemptions or reliefs. Pay additional IHT when sending form if asset values have increased, or claim refund

Answer 31

Direct payment scheme - banks can make direct payment from deceased's account to HMRC by transfer PRs must complete schedule IHT 423 Can borrow from a beneficiary, or a bank.

Answer 32

Variation Disclaimer Precatory trust

Answer 33

Direction from an original beneficiary to the deceased's PRs to transfer property that the beneficiary is entitled to under terms of a will or intestacy rules to another person instead

Answer 34

Gift is read back to the date of the deceased's death, and treated for IHT purposes as having been made by the deceased, to the new beneficiary. Means that a) original beneficiary does not make a PET and b) IHT due on deceased's death estate is recalculated on the basis that the deceased left the property to the new beneficiary

Answer 35

Made by the original beneficiary in writing Within two years following deceased’s death Contains an express statement by the beneficiary confirming S142 should apply Not made for consideration in money or money’s worth

Answer 36

No need for permission If additional IHT due as a consequence - PRs should sign the variaiton, provide HMRC with copy of variation and pay amount due

Answer 37

If assets they hold are insufficient to discharge the additional tax payable

Answer 38

Can write back gift provided that following conditions apply: Effect: gift is written back and treated as having been made by the deceased No issue of additional CGT – no CGT payable in respect of deceased’s death estate in the first place Gifts of cash are exempt from CGT – only need to consider this when it is non-cash assets

Answer 39

No - if there is no need to write back, can give the inheritance away without making a variation

Answer 40

A refusal to accept property to which a beneficiary is entitled (either intestacy or a will) Limitations to use of disclaimers: Beneficiary can only disclaim before acceptance Beneficiary can only disclaim the whole gift Disclaimer of a beneficiary’s rights under a will does not disclaim their rights under intestacy which may arise as a consequence of disclaiming their testamentary inheritance Inheritance passes as if the gift to the original beneficiary had failed - ultimate destination is determined by provisions in the will or the intestacy rules - original beneficiary cannot control who receives the assets they disclaim

Answer 41

A gift made to a beneficiary by will, with a wish expressed as to how the beneficiary should pass on those assets to others.

Answer 42

Treated for IHT purposes as gifts made by T's will, not the beneficiary. Writing back effect happens automatically.

Answer 43

Above 2 million, reduction of £1 for every £2 over £2 million No RNRB available at all for net estates worth £2,350,000 or more; or £2,700,000 where a full transferred RNRB applies

Answer 44

HRMC will consider the spouse as the beneficiary of the estate even though she is the life tenant as the life interest is a qualifying interest in possession.