Topic 12 - Inheritance Tax - additional aspects Flashcards
What extra rules are there for domicile status for IHT?
What are the 3 types of deemed dom for IHT??
UK domicile or UK deemed domiciled are charged on worldwide assets
Non-UK domicile are charged on transfers of UK assets only
Deemed domicile for IHT Purposes:
- UK dom individual leaving the UK
- UK dom retained for 3 years - Formerly dom’ed residents deemed dom if:
- Born in UK
- Had a UK dom of origin
- UK resident in tax year
- Was UK resident for a least on of two years immediately preceding the tax year. - Long term residents deemed dom if:
- UK resident for 15/20 previous tax years; AND
- UK resident for a least 1 of the previous 4 tax years ending with the tax year of the chargeable transfer
If a non UK domicile individual elects to be treated as UK domicile of IHT purpose (for fully exempt transfers without the limit between spouses of diff doms):
- When can the status apply from?
- Is this irrevocable?
- When does election have to be made?
- any date within 7 years before election.
- Irrevocable but lapses if non resident in the UK For 4 full tax years.
- Can be made within 2 years of death of either spouse.
State the location of assets for IHT purposes for: Land and buildings Shares Chattels Debts due to the individual Bank accounts Life insurance policies Business
Land and buildings - Physical location
Shares - Where shares were registered
Chattels - Location at time of death/transfer
Debts due to the individual - Where debtor lives
Bank accounts - Location of branch
Life insurance policies - Where proceeds are payable
Business - where the business is carried on
How would you value an overseas assets in the death estate?
Valued at market value as normal.
If valued in foreign currency - convert using exchange rate at date of death which gives lowest valuation.
Value of foreign assets: admin costs.
What is the cap for administration costs re the sale of an assets
allowable deduction capped at 5%.
How is double taxation relief calculated?
Lower of:
Overseas tax suffered; and
UK IHT payable on overseas asset
UK IHT payable on overseas asset:
IHT on estate after QSR/ Gross chargeable estate x value of asset net of allowable expenses.
When would you be able to pay in instalments?
10 equal annual instalments on qualifying non liquid assets:
-Land and buildings
-Shares or securities if controlled by transferror
-Shares of securities in an unquoted company where
tax arises on death/ > 20% of total IHT
-Shares in an unquoted company value at > £20k
and represents 10% of nominal value
- A business or an interest in a business.
If property sold, outstanding tax must be paid immediately.
Define a deed of variation?
All beneficiaries must agree to alter the will
- in writing
- within 2 years of a death
- all beneficials need to sign
- state in variation that it is inteded to be effective for IHT and/or CGT purpose (not very effect for CGT as transfer at MV)
What are the potential uses of a deed of variation?
Divert family home to direct descendant to get RNRB
Increase gifts to charity to obtain 36% rate of tax
Define a gift with reservation?
An individual gifts an asset in their lifetime but still retains a benefit.
How is a gift with reservation treated in lifetime?
As a PET or CLT
How is a gift with reservation treated on death?
Reservation still in place on death - asset is included in death estate
Reservation lifted pre death - deemed a PET when reservation lifted MV at date of reservation lifted.
For a gift with reservation, any tax due is payable by who?
What are the exceptions to rules of gifts with reservation?
The donee.
Full market rent paid
Unforeseen circumstances eg - donor needs to be cared for so returns to home.
