Inheritance tax

Question 1

transfer of value

Answer 1

• when there’s a disposition which results in a reduction in the value of the transferor’s estate

Question 2

Depositions that aren’t deemed as transfer of value

Answer 2

• no gratuitous intent
• transfer allowable expenditure for income or corp tax
• made for maintenance of family
• caused by death on active service

Question 3

chargeable property

Answer 3

all property to which a person is beneficially entitled

Question 4

all property is chargeable EXCEPT…

Answer 4

• those outside the uk or owned by non-doms
• certain gov securities held by non uk residents
• certain heritage properties
• a reversionary invest in a trust

Question 5

Chargeable person

Answer 5

• individual who is dom in the uk is liable for all uk and overseas properties
• non uk dom is chargeable for uk properties
• married couples are assessed separately

Question 6

transfers which are wholly expect from IHT

Answer 6

• transfers to spouses/ civil partners
• gifts to charities
• gifts made for national purposes
• gifts of pre-eminent property to nation
• transfers made to maintain heritage property
• small gifts less than £250 per tax year

Question 7

Gifts on marriage are exempt from IHT up to:

Answer 7

• £5000 from parent
• £2,500 from remote ancestor
• £2,500 from one party to another
• £1,000 otherwise

Question 8

Annual Exemption

Answer 8

• First £3,000 of lifetime transfer made in any tax year is exempt.
• unused part can be carried into the next tax year

Question 9

Potentially Exempt Transfers (PET)

Answer 9

• The rules state that the individual has to survive for 7 years after making the gift for it to be exempt.
• charged to IHT if transferor dies within 7 years

Question 10

Taper relief - tax charges

Answer 10

• 3 yrs or less … 0% tax
• 3 ≤ x < 4 yrs …. 20% tax
• 4 ≤ x < 5 yrs …. 40% tax
• 5 ≤ x < 6 yrs …. 60% tax
• 6 ≤ x < 7 yrs …. 80% tax

Question 11

Quick succession relief

Answer 11

• available if part of the estate was transferred within 5 yrs of death and was charged to IHT at that time

Question 12

Transfer of unused nil rate band

Answer 12

• if one spouse has some unused portion it can be transferred to surviving spouse

Question 13

Resident nil rate band

Answer 13

• available for estates which include property
• RNRB is the lower value of the property and the default allowance.
• RNRB is reduced if value of estate exceeds £2 mil

Question 14

Valuation

Answer 14

value of transfer is equal to the open market value

Question 15

Admin and payment of IHT

Answer 15

• must deliver accounts of capital taxes within 12 months
• must pay within 6 months from the end of the month in which the transfer was made

Question 16

Business Property Relief (BPR) and Agricultural property relief (APR)

Answer 16

• value of property for IHT purposes may be reduced by 50% or 100% for tax
• must have owned business property/ used for agricultural purposes for 2 years prior to transfer
• rate of relief depends on category