inheritance tax

Question 1

Lifetime transfers

Answer 1

LCT - lifetime chargeable transfer
- made whilst transferor is still alive
-
- transfer for value
- charged to tax at 0% if falls within the nil rate band.
- charged to tax at the lifetime rate currently 20% when made, if it falls outside the nil rate band.
- if the trandferor dies within 7 years of the transfer - possibly charged at 40% (death rate)
subject to taper relief if the transferor dies within 3-7 years of the transfer.
PET - potentially exempt transfer
- made whilst still alive.
- transfer for value
is not charged to tax at all at all if the transferor survives 7 years
is charged at 40% if within this.
- subject to taper relief.

Question 2

transfer for value

Answer 2

the amount the transferor’s estate is reduced by the disposition
if not intended to be a gift then it doesnt attract IHT.

Question 3

exempt transfers

Answer 3

• gifts to spouse, charity, political party or national institution
• annual exemption; 3,000 per year - can be carried forward one tax year ( do not apply to death estate ).
• presents: wedding, engagement presents, and small gifts - 5,000 (parent), 2500 (grandparent) 1,000 (other). gift not exceeding 250 will be exempt. APPLY TO LIFETIME GIFTS ONLY.

Question 4

taxation of potentially exempt transfers

Answer 4

if die - and falls outside the nil rate band - 40% is now payable on the entire gift. however taper relief may apply - if a transferor dies between four and 5 years after making the gift, the tax payable will be 60% of the iHT payable on that gift.

Question 5

taxation of Lifetime chargeable transfers

Answer 5

attracts IHT as soon as gift takes place. if it falls above the nil rate band - it is payable at the lifetime rate of 20% as opposed to the death rate. same gift can be taxed twice if they die before 7 years.

Question 6

calculation of lifetime gifts

Answer 6

1. what is the value of the transfer
2. deduct any available exemptions
3. deduct any available reliefs
4. calculate the cumulative total of all the transfers to date.
5. is there anything remaining of the nil rate band.
6. apply IHT to the new transfer value at the appliciable rate.
   7 apply taper relief

Question 7

exemptions

Answer 7

annual exemptions are not included in the death estate calc.

Question 8

reliefs

Answer 8

business property relief:
- will be available at 100% if the transferor is seling a business or an interest in a business and the transferor has owned the business as a sole proprietor dor at least two years or if the transfer is of shares in an unquoted company (private company)
- available at 50% uf the transferor has control of a public company and is transferring shares of that company or if the transferor is transferring specified assets of a company that is controlled by the transferor.

agriculutral property relief.
- 100% if the transferor occupied the transferred property for agricultural purposes for at least 2 years prior to the trnasfer or itwas owned by someone else

Question 9

nil rate band

Answer 9

• each taxpayer can transfer up to 325,000 over a total period of 7 years at a tax rate of 0% - standard NRB.

other bands only relevant on death:
spouses:
- transferable NRB - if a married person dies with part of their NRB unused that portion can be transferred to their widower subject to complex rules.

residence nrb:
- 175,000 is available where after 6th april 2017 a residential property in the deceased’s estate is being transferred to a direct descendant of the deceased or direct descendants of the deceased’s spouse

Question 10

inheritance tax on death estate