Tax

Question 1

Who has responsible to work out the tax payable on the estate ?

Answer 1

○ Personal representatives - intestate
Executors - wills

Question 2

Stamp duty land tax

Answer 2

Property transfered on death then it’s exempt from stamp duty land tax; only trustees under a trust might have to pay it

	○ Finance Act 2003, Schedule 3, 3A: (1) The acquisition of property by a person in or towards satisfaction of his entitlement under or in relation to the will of a deceased person, or on the intestacy of a deceased person, is exempt from charge.
		○ Must transfer within 2 years of death; and No consideration in money or money’s worth must be paid

Question 3

Inheritence tax rate

Answer 3

40%

Question 4

When is inheritence tax paid ?

Answer 4

HT only payable on death or lifetime transfer where gift or estate exceeds NRB

Question 5

How much is Nil rate band ?

Answer 5

£325,000
below this exempt from the tax; transfered between spouses are exempt from this

Question 6

How much is residential nil rate band ?

Answer 6

£175,000
the deceased must have resided there at some point; inherited by a linear decendant or a step child, foster child

Question 7

what are two types of lifetime transfers ? + their rates

Answer 7

Lifetime Chargeable Transfer (LCTs) - 20% (increased to 40% if D dies within 7 years)
Potentially Exempt Transfer (PETs) - 40%

Question 8

S.8 inheritence tax act

Answer 8

If a spouse died and they haven’t used their NRB - you can inherit the spouse’s unused portion

Question 9

What is an LCT ?

Answer 9

Lifetime Chargeable Transfer - trusts + to companies
Gifts to relevant property trusts (gifts you put into a trust) - half of the inheritence taxi is paid at the time the transfer to the trust is made so 20% at this time and (but remember about nil rate band when calculating the 20%)
○ Gifts to companies or between certain types of company

Calculations
□ at the time of the relevant transfer at 20% (of anything transferred after exemptions and reliefs are applied and above remaining NRB)
if the transferor dies within 7 years at 40% (subject to taper relief after 3 years)
□ If transferor dies after 7 years - 0%

Question 10

What is PET ?

Answer 10

Lifetime gifts to individuals
○ The gift must increase the donee’s estate or the property must become comprised in the donee’s estate - no tax at the time of the transfer but might be 40% tax if I die less than 7 years after the transfer was made
□ At time of transfer - 0% (even if gift is above NRB)
□ if the transferor dies within 7 years at 40% (subject to taper relief after 3 years)
□ If transferor dies after 7 years - 0%

Question 11

Tapering relief

Answer 11

applies to gifts made between 3-7 years before the transferor’s death * Inheritance Tax Act 1984, s 7(4)
○ …in the case of a chargeable transfer made within that period but more than three years before the death, the tax charged on the value transferred shall be charged at the following percentage of the rate or rates referred to in subsection (1) above—
○ (a)where the transfer is made more than three but not more than four years before the death, 80 per cent;
○ (b)where the transfer is made more than four but not more than five years before the death, 60 per cent;
○ (c)where the transfer is made more than five but not more than six years before the death, 40 per cent; and
○ (d)where the transfer is made more than six but not more than seven years before the death, 20 per cent.

Question 12

Tax exempt gifts

Answer 12

Transfers between spouses or civil partners (in life and on death) – s 18
£3,000 in gifts per annum (annual exemption) s 19
Can carry any unused allowance in Year 1 to Year 2
○ 1 year carry over only
○ Max annual allowance therefore £6,000
Small gift allowance £250 per person s 20
Gifts in consideration of marriage/civil partnership – £5,000 to a child or step-child, £2,500 to grandchildren or great-grandchildren, and £1,000 to anyone else s 22
Gifts to charity s 23
Normal expenditure out of income s 21

If you give at leat 10% of your estate to charity then the tax you pay is 36% not 40% !!!!!!!!!!!!!!!

Question 13

Tax on business property

Answer 13

To claim BPR relief transferor must have owned business for 2 years before transfer (spouse exception)
* 100% Relief
○ property consisting of a business or interest in a business; or
○ unquoted shares in a company (private limited company)
* 50% Relief
○ quoted shares (public company) in a company which the transferor had control over (more than 50%)
Land, building, machinery or plant owned personally by the transferor, but used by the business they control

Question 14

Net estate

Answer 14

Net estate = everything that is left after debts, funeral expenses, and liabilities (including tax bills)

Question 15

Capital gains tax

Answer 15

‘Ataxon any chargeable gainsmade on the disposal or deemed disposal of capital assets by individuals, personal representatives and trustees in ataxyear (which is a year ending on 5 April)
Exemptions:
○ Gifts to spouses s 58
○ Sale of the main residential home s 222
○ Gifts to charity s 256
○ Personal Chattels worth less than £6,000 s 262(1)
Sale of a personal motor vehicle s 263

* Personal (in life):
	○ Basic Rate Income Tax Payer:
		§ 10%
		§ 18% (residential property)
	○ Higher/Additional Rate Income Tax Payer:
		§ 20%
		§ 28% (residential property)
* Personal Representative:
	○ 20% 28% (residential property)