inheritance tax (lifetime transfer) week 6 Flashcards
what is the general rule for who pays the IHT on an LCT during lifetime?
the person who receives the asset is usually liable to pay the IHT
(for an LCT that is the trustees who pay the IHT)
when does grossing up happen?
when the donor pays the IHT themselves therefore, give the assets fully settled up + pay the IHT on top of that
who is liable to pay for failed PETs and LCTs that have become chargeable as a result of the donor dying?
the person who receives them is liable to pay the IHT due
what is the deadline that the recipient of an LCT or failed PET must pay the IHT after the donor’s death?
12 months from the end of the month of death
what happens if the recipient of an LCT or failed PET do not pay the IHT after the donor’s death (dont meet the deadline)?
the deceased’s PRs then become liable to pay the IHT
how is IHT payable on the free estate (the rest of the estate)?
it is payable from the residue and it is the PRs who are liable to pay this tax
what are the available exemptions and relies that apply to chargeable lifetime transfers (failed PETs and LCTs) only and cannot be applied to the death estate?
- annual exemption
- family maintenance exemption
- small gifts exemption
- marriage exemption
- normal expenditure out of income exemption
what is the annual exemption that an individual can make each year tax free?
£3,000 per tax year
can use the previous tax year too if it hasn’t been used (eg, max is £6,000)
what is family maintenance exemption?
maintenance payments to:
spouse (divorce settlement)
maintenance to a minor, or child in education or training
dependent relative in care
what is the small gifts allowance exemption?
can make small gifts of £250 per recipient tax free
no limit on the amount of recipients you give it to
can you use other exemptions such as the annual exemption with the small gifts allowance?
no you cannot
can only use small gifts exemption on its own
if a person makes a gift of £251 to a person can they use the small gifts exemption?
no, they cannot = as it is up to £250
what is the marriage exemption for IHT?
relief given to a person who gives money to someone as a wedding gift.
relief applies per donor so each parent can give a gift
if a gift is made by a parent to one of the parties for marriage exemption - how much can their gift be tax free?
£5,000
if a gift is made by a grandparent to one of the parties for marriage exemption - how much can their gift be tax free?
£2,500
