Inheritance Tax and the Business Relief Exemption Flashcards
What are the three IHT trigger events relevant for BRE?
1) Potentially exempt transfers (made by person during lifetime)
2) Lifetime chargeable transfers (made by person during lifetime)
3) Death
What is a Potentially Exempt Transfer?
Transfer or value made by person during lifetime to another individual, e.g. gift of £10,000 to child contribution towards deposit of flat
What is a Lifetime Chargeable Transfer?
Transfer of value made by a person into a trust during their lifetime on or after 22 March 2006
How is the value calculated for PET and LCT?
The relevant value is the amount by which the transferor’s estate is reduced, rather than the face value
How is the value of items calculated when passed through death?
Valued at the price it might reasonably be expected to fetch if sold on open market
What are the nil rate band limit?
£325,000
What are the rates of tax?
Above NRB – 40% (death rate) or 20% (lifetime rate)
What is the additional nil rate band called?
The Residence Nil Rate Band
What is the residence nil rate band?
£175,000 – for individuals who die after 2017 and leave family home to lineal descendants
What is cumulative total?
The total chargeable value of all chargeable transfers made in the previous 7 years
What is Business Property Relief?
Exemption which applies to value of qualifying business assets in lifetime and death transfers
What does business property include?
- A business or interest in business
- Shares in an unquoted company
- Shares in a quoted company
- Assets owned by transferor but used for business purposes
What is an unquoted company?
Private company
How long must the transferor have owned business assets before it is included as business property?
For at least 2 years immediately prior to transfer
What is the rate of relief for business relief?
- 100% if shares in unquoted company
- 50% if quoted company if shareholder had control of the company
- 50% to land or buildings category
