Taxation Flashcards
What is Inheritance Tax (IHT)
A tax payable, above a certain threshold on somebody’s estate upon death.
What is said threshold for IHT?
There is a Nil Rate Band of £325,000 in Scotland
What IHT relief are you aware of?
- APR
- BPR
- PET (Potentially Exempt Transfer)
What is APR?
An IHT relief in which agricultural land and property can be eligible for, meeting certain criteria:
- the owner has farmed and occupied toe farm for 2-years
- the owner has owned and let the farm for agricultural purpose for more than 7-years
- only the ‘ag value’ applies
Are farm tenancies eligible for APR?
Those granted after the 1st of September are eligible for 100%
Those before 50%
Are farm houses and cottages eligible for APR?
House - if proportionate to the farming operation (Higginson v Anthrobus)
Cottages - if occupied by ag workers
Ag value will be used. Usually 30% of the MV
You mention BPR, what do you know of this?
An IHT relief on Business Assets
- including tenants stock and machinery.
What might trigger BPR on a farm?
A change from agriculture in a diversification project.
What is a Potentially Exempt Transfer (PET)?
When an asset is gifted 7-years prior to the death of an individual. if the gifter dies before the 7-year threshold, taper relief will come into play.
What do you know of taper relief?
20% - 3-4 years
40% - 4-5 years
60% relief - 5-6 years
80% relief - 6-7 years
How else could you avoid IHT?
Through the gifting of assets to a spouse or civil partner.
And finally, to whom is IHT payable?
His Majesty’s Custom and Revenue (HMRC).
What is CGT?
A tax on the increase of property value following a sale of disposal.
What are the CGT rates?
As Roxburghe are a higher rate taxpayer, the rates would be as follows:
Resi: 28%
Other: 20%
How is the sale of a farmhouse handled?
Agricultural value is taken into account (MV less 30% would be a good indicator).
What CGT relief are you aware of?
Rollover relief.
OK, what is rollover relief?
when the gain, or all of the proceeds of the sale of a capital asset are injected into a trading asset.
Is there a time frame on rollover?
Yes, the gain must be ‘rolled over’ four years from the end of the tax year in which the asset was sold.
What is income tax (IT)?
A tax on taxable income.
What IT was payable upon the disposal of the cattle at Rawburn?
47%
What is Herd Basis?
A tax relief for a ‘herd’ of agricultural animals.
What are the advantages of Herd Basis?
- If the book value and sale value of an animal fluxuates, income tax is not payable.
- When all or a substantial amount (over 20%) of a herd is sold without replacement, no tax will be payable on the difference between sale and book value.
- Herd basis is ‘unelectable’.
When do you apply for herd basis?
An election would be made no later than 5 years from when the ‘herd’ was first compiled.
What is LBTT?
A charge on land transactions, payable by the purchaser.
What are the LBTT Rates
They differ between residential, and commercial. As follows:
Resi
Up to £145,000: 0%
£145,000 - £250,000: 2%
£250,000 - £325,000: 5%
£325,000 - £750,000: 10%
Above £750,000: 12%
How is commercial woodland handled from a tax stance?
Exempt in most cases.
