Module 3 IHT Flashcards
To qualify for 36% tax rate for estate if there is charitable gift what size must bequest to charity be
10 % of net estate after all exemptions don’t,t forget spousal exemption
What happens to RNRB if there is a mortgage.
Reduced to the equity value after mortgage taken off
How to remember formula for quick succession relief
TNG
TAX X NET / GROSS
How do you calc periodic charge on say £1m
10yr charge Deduct NRB £1m - £325k = 675k 675k x 30% x 20% = £40500 Effective rate £40500/£1m = 4.05%
Exit charge on 13th anniversary when worth say £1.2 m
Explain how I claim for the transfer of an unused nil rate band and residence nil rate band should be made
A claim should be usually made by the legal personal representative of the second of the couple to die
The claim should be made within two years of the end of the month in which the second death occurred within three months of beginning to act as LPR
The ice investment can only be made in a company that makes several conditions state what these conditions are (.07)
– Company must be unlisted when EIS shares are issued and there can be no arrangements at the time for it to become listed
– company must have a permanent establishment in the UK
– company must have fewer than 250 (500 for knowledge intensive) full-time employees
– processes must not be more than £15 million before investment or £16 million after investment
– must be carrying on a qualifying trade or be parent company of a trading group. Some trays excluded
– cannot raise more than £5 million (£10 million knowledge intensive) in the past twelve months from EIS or VCT investment
– twelve million pounds ( twenty million pounds for knowledge intensive ) total investment
Explain any other generic tax advantages associated with diocese of the inheritance tax and including
– Income tax relief at 30% as a tax reducer up to a maximum investment of £1 million (2000,000 knowledge intensive) per tax year
– relief is the drawing of shares are sold within three years
– investment can be carried out one year if this is more advantageous
– disposal proceeds exempt from CGT he provided EIS is held for three years and that income tax was given at the outset
– can be used to defer again from CGT if the original disposal proceeds are invested in an EIS no more than one year before or up to 3 years after the original disposal. No maximum out on the amount that can be deferred. Game becomes chargeable upon disposal of EIS shares (unless reinvested in another I S)
– if disposal creates a loss them out of the loss (less income tax relief) can either be deducted from other capital gains or income
– income and CGT relief only available to investors and connect with the company although deferral of CGT is available to everyone
– Investor cannot have any prearranged exit provisions
Explain how holdover relief applies in respect of gifts of company shares
Applies to gift of business assets
The first capital gains tax liability on the gift by transferring the liability to the recipient when they dispose of it in future i.e. to the person
Holdover relief must be applied for by both parties
Explain how rollover relief could assist in mitigating tax and respect of Lucy selling her company premises
The disposal can be deferred or “rolled over“ until the sale of the newly acquired assets
The process must be reinvested into trade or business assets
Re-investment must take place up to 1 year before and three years after the disposal
What is the formula for quick succession relief
Tax paid multiplied by gross transfer divided by net transfer – this is multiplied by the relevant percentage
Gifts
The date that inheritance tax has to be paid in respect of both a lifetime gift and also in respect of after death
In respect of lifetime tax it is payable within six months of the end of the month that the gift was made although if the gift was between the 5th of April and first of October it is due by the 30th of April the following year
In the event of death taxes payable within six months of the end of the month that death occurred
