IHT Reliefs (lifetime & deaths) Flashcards
What is the effect of Business Property Relief (BPR) on inheritance tax liability?
A) It exempts all business assets from inheritance tax.
B) It reduces the taxable value of qualifying business property.
C) It applies only to businesses with a turnover exceeding £1 million.
D) It applies only to transfers made on death.
B – It reduces the taxable value of qualifying business property.
Explanation:
BPR allows business assets to be transferred with a reduction in their taxable value for inheritance tax purposes, making it easier for businesses to remain within families.
What is the minimum ownership period required for Business Property Relief (BPR) to apply?
A) 6 months
B) 1 year
C) 2 years
D) 7 years
C – 2 years.
Explanation:
A person must own qualifying business assets for at least 2 years immediately before the transfer to qualify for BPR.
Which of the following business assets qualifies for 100% Business Property Relief?
A) Shares in a private (unquoted) company
B) A controlling interest in a publicly listed company
C) Rental properties owned by a business
D) Government bonds held in a trust
A – Shares in a private (unquoted) company.
Explanation:
100% BPR applies to shares in unquoted trading companies. Publicly listed company shares only qualify if the shareholder has control (50%+), and investment assets (such as rental properties) do not qualify for BPR.
Which of the following correctly describes the operation of Agricultural Property Relief (APR)?
A) APR applies only if the deceased was a full-time farmer.
B) APR applies only to land but not to buildings.
C) APR applies to agricultural land and farmhouses used for farming.
D) APR applies to all land in rural areas, regardless of use.
C – APR applies to agricultural land and farmhouses used for farming.
Explanation:
APR applies to land, farmhouses, and buildings used for agricultural purposes. It does not require the owner to be a full-time farmer, but the land must be used for farming or agricultural business.
How long must a person own agricultural land for it to qualify for Agricultural Property Relief (APR)?
A) 1 year
B) 2 years (if occupied) or 7 years (if let)
C) 5 years
D) 10 years
B – 2 years (if occupied) or 7 years (if let).
Explanation:
APR applies if the land has been occupied for agricultural purposes for at least 2 years before transfer. If it was let to a tenant, it must have been used for at least 7 years before transfer.
Emma owns a farm and has lived there for 15 years. She dies and leaves it to her daughter. What IHT relief applies?
A) No relief applies because Emma was not a farmer.
B) APR at 100% because the land was used for farming.
C) APR at 50% because it is an investment asset.
D) No relief applies because APR only applies to land owned for 20+ years.
B – APR at 100% because the land was used for farming.
Explanation:
Since Emma occupied the land for agricultural purposes, 100% APR applies to its agricultural value.
David owns a private business and gifts his shares to his son. He dies 3 years later. Will BPR apply?
A) Yes, if the son still owns the shares at David’s death.
B) No, because the business was gifted.
C) No, because BPR applies only to businesses worth more than £500,000.
D) Yes, but only at 50% relief.
A – Yes, if the son still owns the shares at David’s death.
Explanation:
BPR applies to lifetime transfers only if the recipient (David’s son) still owns the business assets at the time of the donor’s death.
Tom owned a business for 5 years but sold it and bought another business. He died 1 year later. Does BPR apply?
A) No, because Tom owned the new business for less than 2 years.
B) No, because BPR does not apply to multiple businesses.
C) Yes, but only at 50% relief.
D) Yes, because the period of ownership is continuous.
D – Yes, because the period of ownership is continuous.
Explanation:
If business assets are sold and replaced with new qualifying business assets, the ownership period is treated as continuous, so BPR is still available.
Paul inherits business assets from his spouse and dies 1 year later, leaving them to his children. Does BPR apply?
A) No, because Paul did not own them for 2 years.
B) Yes, because Paul “inherits” his spouse’s ownership period.
C) No, because the children must own them for 2 more years.
D) Yes, but only if Paul ran the business himself.
B – Yes, because Paul “inherits” his spouse’s ownership period.
Explanation:
When a spouse inherits business assets, they are deemed to have owned them from the original acquisition date, so BPR still applies.
John owns farmland and a rented cottage on the property. Does APR apply to both?
A) APR applies only to the farmland.
B) APR applies to both the farmland and cottage.
C) APR applies only if the cottage is occupied by a farm worker.
D) APR does not apply at all.
C – APR applies only if the cottage is occupied by a farm worker.
Explanation:
Farmhouses and cottages must be “character appropriate” to the agricultural land and occupied for agricultural purposes to qualify for APR.
