IHT Death Tax Proper

Question 1

How to calculate IHT on Death?

Answer 1

1. work out personal nil rate band left after CLT and PETs
2. Add any Transferable Nil Rate band or Residence Nil Rate Band
3. Work out chargeable assets in estate
   - Exemptions: gifts to spouse and charity
   - Business or Agricultural Exemptions
4. (total nil rate band) - (net value chargeable assets)
5. Tax at 40% (or 36% if 10% + to charity)

Question 2

What assets are exempt from estate?

Answer 2

Gifts to spouse
- up to £325,000 if spouse is non-dom

Gifts to Charity
- uk/EEA charities

Business
- 50% quoted shares if control company or assets used in partnerhsip of own company
- 100% if unquoted shares or sole trader/parter intetest

Agriculatural

Question 3

How to value chargeable assets?

Answer 3

Open Market Value at date of death

EXCEPTION
- quoted shares (at Stock Exchange price on date of death)
- jointly owned land

Question 4

How to Value jointly owned land on death?

Answer 4

Held with Spouse
- related property rule used
- take percentage of total value as held by spouses

Not Held with Spouse
- value share as stand alone basis
- worth less as jointly held (normally 5-15% less)

Question 5

What is deducted to get net value of estate assets?

Answer 5

Liability
- debts, income tax owed by deceased, reasonable funeral expenses

NOT ALLOWED
- probate costs

Question 6

Rule of Gifts with Reservation of Benefit?

Answer 6

Gifts donor gives they they derive some benefit from are treated as still being part of estate and IHT must be paid on it
- ONLY if have benefit at date of death

EXCEPTION
- if they pay market rent

Question 7

What happens if donor gives up benefit in asset they gifted before dying?

Answer 7

Treated as PET from date they gave up benefit and at market value of asset when they gave up benefit