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DIPfa Taxation > Topic 4 Inheritance Tax > Flashcards

Topic 4 Inheritance Tax Flashcards

1
Q

An individual domiciled in the UK pays IHT on all of there assets.

True or False

A

True

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2
Q

Does an individual domiciled elsewhere pay IHT on all of their assets?

A

No only on assets in the UK

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3
Q

If 10% or more of the estate is left to charity what rate of IHT is payable?

A

36%

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4
Q

What happens to the RNRB if the estate value is over £2 million?

A

It reduces £2 for every £1

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5
Q

On the death of a person who has used some of their NRB what happens to the rest of it?

A

The unused percentage is transferred the surviving spouses RNB

E.G
£50,000 of the NRB left (£50k / £325k = 28.57% to be transferred.

28.57% x £325k = £92,852.50 + 325k = £417,852.50 to spouse

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6
Q

For owners in a joint tenancy agreement (not spouses) what happens to the deceased’s share?

A

It forms part of the estate for IHT purposes

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7
Q

What happens with IHT where there is a Tenancy in common arrangement?

A

A discount is introduced to offset the difficulty of selling the property

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8
Q

What is the discount for a 50/50 ownership in Tennants In Common

A

15%

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9
Q

If an owner in Tennants In Common owns less than 50% what is likely to happen to their discount?

A

Likely to be increased

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10
Q

All these are what in relation to IHT?

  • Transfer between spouses
  • Small gifts
  • Annual exemptions
  • Donations to charity, political parties, for nation
A

Exempt for IHT

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11
Q

All these are what in relation to IHT?

  • Wedding gifts
  • Gifts on a regular basis out of income
  • Family maintenance
  • Death in active service
A

Exempt for IHT

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12
Q

Transfers between spouses are exempt from IHT however what happens if the recipient is non UK domicile?

A

Exemption is limited to £325k

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13
Q

Small gifts are exempt from IHT up to what value?

A

£250

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14
Q

How many years can the Annual Exempt Amount (AEA) be carried forward if it is unused in a tax year?

A

In to the next tax year but no further

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15
Q

What is the amount a spouse or civil partner can gift to their partner that is free of IHT?

A

£2,500

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16
Q

What is the amount that a donor can gift to another person that is wedding gift that is free of IHT?

A

£1,000

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17
Q

Family maintenance payments are exempt from IHT?

True or False

A

True

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18
Q

When calculating IHT what is taken into consideration first the estate or the PET’s?

A

The Potentially Exempt Transfers

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19
Q

What is a “Gift with Reservation”

A

When a donor gifts an asset to someone else but continues to receive a benefit from the gift

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20
Q

How is a “Gift with Reservation” avoided?

A

It is added back onto the donor’s estate on death

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21
Q

Chargeable Lifetime Transfers are what?

A

Gifts to companies

22
Q

What rate and at what time is the IHT on Chargeable Lifetime Transfers to be made?

A

Immediately and at a rate of 20%

23
Q

How much IHT is due if a donor dies within 3 years of making a gift as a PET?

A

100% of gift value

24
Q

How much IHT is due if a donor dies within 3-4 years of making a gift as a PET?

A

80% of gift value

25
Q

How much IHT is due if a donor dies within 4-5 years of making a gift as a PET?

A

60% of gift

26
Q

How much IHT is due if a donor dies within 5-6 years of making a gift as a PET?

A

40%

27
Q

How much IHT is due if a donor dies within 6-7 years of making a gift as a PET?

A

20%

28
Q

What is the “Cumulative Principle”?

A

The 7 year period is which a person’s estate is checked to see if other Chargeable Lifetime Transfers have been made during this time

29
Q

Lifetime IHT is only payable if?

A

The value of the cumulative CLT transfers exceed the value of the NRB at the time of transfer

30
Q

The below are what?

  • Quick Succession Relief
  • Business Relief
  • Agricultural Relief
  • Woodland Relief
A

Types of relief available on a Chargeable Lifetime Transfer

31
Q

What is Quick Succession Relief?

A

An IHT relief available if an recipient of a gift does within 5 years of receiving the gift

32
Q

How does Quick Succession Relief work?

A

A credit given which reduces by 20% (5 year maximum) each year on receipt of a gift.

33
Q

What is Business Relief?

A

Relief given for qualifying business assets

34
Q

What percentage of Business Relief do the below examples receive?

  • Interest in an incorporated business
  • Shareholding of a size in an unlisted company
  • Shareholding in AIM- Listed company
A

100%

35
Q

What percentage of Business Relief do the below examples receive?

  • Controlling shareholding in a listed company
  • Land, building or machinery used wholly or mainly for a business carried on (which donor has interest in)
A

50%

36
Q

To qualify for business relief what does the claimer need to have done?

A

Owned the relevant property for at least 2 years before the date of transfer

37
Q

Is the Business Relief available to the following in making or holding investments in?

  • Securities
  • Stocks and share
  • Land and buildings
A

No

38
Q

To qualify for Agricultural Relief how long must the land have been farmed by the transferor?

A

2 years by the transferor

39
Q

What are the conditions that must be fulfilled if agricultural relief is to be claimed for lifetime transfers?

A
  • Recipient must have retained the gifted property from the transfer date to the death of the donor
  • Gifted property is disposed of and proceeds used to by another agricultural property within 3 years
40
Q

What is available if a person inherits woodland that was not used for business purposes within 5 years?

A

A deferral of IHT is available on election

41
Q

When is IHT on woodland paid?

A

When timber is sold

42
Q

What is Pre-Owned Assets Tax (POAT)?

A

A tax that is chargeable to anyone who owned a property that they have sold and continue to benefit from owned after March 1986

43
Q

Pre-Owned Assets Tax (POAT) is payable on what type of property?

A
  • Land
  • Chattels
  • Intangible Property
44
Q

For a Pre-Owned Assets Tax (POAT) tax is due on income?

A

Above £5,000

45
Q

Pre-Owned Assets Tax (POAT) IHT on Chattels & Intangible Assets is calculated how?

A

Cash value off benefit at a percentage of the open market vaule

46
Q

What are these in relation to Pre-Owned Assets Tax (POAT) charges?

  • Transfers between spouses or civil partners
  • Transfers between former spouses or civil partner where it has been ordered by a court
  • Transfers between former spouses or civil partner where they have an interest from the outset
  • Assets sold at arms length for cash if the price is similar to what an unconnected purchaser would have paid
A

Exclusions from Pre-Owned Assets Tax (POAT)

47
Q

What are these in relation to Pre-Owned Assets Tax (POAT) charges?

  • Gifted before 18th March 1986
  • Transferred for the purposes of maintaining the family in accordance with the “maintenance of family” IHT exemption
  • Gift covered by small gifts or AEA
  • All ready forms part of the donor’s estate due to gifts with reservation rule
A

Exemptions from Pre-Owned Assets Tax (POAT)

48
Q

These are what what in relation to pre-owned Assets Tax (POAT)?

  • Dismantling the scheme
  • Full market rent is paid for occupation of the property
  • Elect the property as part of the IHT estate
A

How Pre-owned Assets Tax (POAT) is avoided

49
Q

Why would a transferor “Gross up” the gift they make?

A

IHT is based on the loss to the transferor so there estate. Making the gift value less

50
Q

When is IHT on CLT’s due if a transfer is made between 6th April & 30th September?

A

30th April the following year

51
Q

When is the IHT on CLT’s between 1st October and 5th April due?

A

No later than 6 months after the end of the month in which the transfer is made

52
Q

When are payments due for IHT if a transfer was made on death?

A

6 months at the end of the month of death

DIPfa Taxation (6 decks)

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