Inheritance Tax: Death Estate And Valuation Flashcards
IHT: Which shares are quoted?
“PLC”
IHT: Quoted shares valuation
LOWER of:
1. Quarter up rule
2. Marked bargain average
IHT: Quoted shares valuation: Quarter up rule calculation
Lower quoted price
+
1/4 (Higher quoted price - lower quoted price)
IHT: Quoted shares valuation: Marked bargain average
Average of highest and lowest marked bargains on the day of transfer
CGT: quoted shares valuation
HALF up rule
IHT: Related property definition
- Spouse
- Charity (In 5y)
- Political party (In 5y)
IHT: Is property transferred to a charity or political party by the persons spouse related property?
Yes
IHT: Related property valuation calculation
Value of whole property
x
(Transferor’s value
/
Related property value)
IHT: Related property valuation rule
HIGHER of RP calculation and valuation under normal rules
Do related property rules apply to CGT?
No
IHT: Shareholding valuation calculation
Value of whole shareholding
x
(Transferor’s no. shares
/
Total related shareholding)
^ no. of shares too I think
IHT: Unit trusts valuation
Bid price
(Lowest price)
IHT: Life assurance policies: Valuation: Related to individuals own life: Not held in trust
Proceeds of policy
(Not market value)
IHT: Life assurance policies: Valuation: Related to individuals own life: Held in trust
Not taxed
IHT: Life assurance policies: Valuation: Related to someone else’s life
Market value of policy
IHT: What does the death estate consist of?
All assets owned at death
Less:
Funeral expenses
Deduct:
1. Prior-death debts
(e.g. outstanding credit card bills)
2. Taxes
(e.g. IT & CGT)
IHT: Death estate: Debts: Can gambling debts be deducted?
No
(Unless legally enforceable)
(Assume not)
IHT: Death estate: Debts: Treatment when debt charged on a specific property (e.g. mortgage)
Deduct primarily from property on which it is charged
IHT: Transfer of unused NRB: Can be transferred to?
Spouse
IHT: Transfer of unused NRB: Calculated how?
Proportion, not amount
IHT: RNRB
Residence nil rate band
IHT: RNRB: Applicability
Net value of property
(MV less liabilities secured on it)
(e.g. motgage)
Left to direct descendants
Other thing to remember about RNRB?
It is tapered
IHT: RNRB: Tapering threshold
£2m
After deductions
(Liabilities, debts)
Before reliefs
(Spouse exemptions, BPR etc.)
IHT: Can unused RNRB be transferred?
Yes
IHT: RNRB: Transferal elegibility: Actions
Spouse
Leaves home to direct descendants
And includes the home in the estate
IHT: RNRB: Transferal elegibility: Does the spouse have to have lived in the house?
Yes
At some stage
(But not necessarily the one lived in with spouse)
IHT: RNRB: Transferal: Calculation
Proportion
IHT: RNRB: Transferal: First of couple died before 6 Apr 2017?
100% unused
(Because didn’t exist then)
ITH: Other thing to remember about transferring RNRB?
Tapering
ITH: RNRB: Transfer: Tapering rule
Same as normal RBRB tapering
IHT: RNRB: Do you need to work out at each point first (even if not a trust)?
I think so, for everything
Same for steps 2&3 I think
IHT: QSR
Quick succession relief
IHT: QSR: Conditions
- Property acquired by the deceased 5y before death
- IHT charge on initial transfer
IHT: Does QSR apply when the asset is no longer held by deceased at the date of death?
Yes
ITH: QSR calculation
Tax
x
(Net/Gross)
x
Relevant %
IHT: QSR for specific legacy: Value of legacy
Increase in transferee’s estate
IHT: QSR for specific legacy: Value of diminution
Value of legacy
Plus
IHT on legacy from residue of first estate
IHT: QSR formula
Net first transfer
x
(tax paid on first estate
/
gross first estate)
x
relevant percentage
OR
(if not given amount of tax on specific legacy)
specific legacy
x
estate rate
x
relevant %
IHT: Treatment of charitable legacies
Reduces IHT rate
Net chargeable estate becomes the taxable estate without deducting the: 1. Charitable legacy
2. RNRB
(In exam often easier to work out the net chargeable estate as 1. Value of taxable death estate 2. Then add back a. value of charitable legacy and b. RNRB)
