Inheritance Tax (1)

Question 1

What is IHT?

Answer 1

A tax on gifts or transfers of value

Question 2

Two main chargeable occasions for IHT?

Answer 2

Lfietime transfers

Gifts made on death

Question 3

Who are chargeable persons?

Answer 3

Individuals and trustees

Question 4

What is a trust?

Answer 4

A legal structure where one person gives property to one or more people to be held for benefit of one or more people

Question 5

What are chargeable persons taxed on

Answer 5

Gifts of wealth (or transfers of value) that they make

Question 6

When can IHT not arise?

Answer 6

Can’t arise unless there is a transfer of value

Question 7

What is a transfer of value?

Answer 7

Any gratuitious disposition made by a person which results in them being worse off, reducing the value of their estate

Question 8

Transfers where there is no gratuitous intent?

Answer 8

Not chargeable to IHT

Question 9

How is the value of asset transferred for IHT always measured?

Answer 9

As reduction in value of donor’s wealth, not the amount gained by the donee

Question 10

Which transfers of value are exempt from inehritance tax?

Answer 10

Any transfers of values between spouses/civil partners

Question 11

What does the IHT exemption cover?

Answer 11

lifetime gifts between them and property passing under a will or on intestacy

Question 12

Amount for annual exemption applying to lifetime transfers

Answer 12

First £3000 of value transferred in any tax yuear is exempt

Question 13

What happens with any unused annual exemption in inheritance tax?

Answer 13

May be carried forward for one year only

Question 14

When is the current year annual exemption used in inheritance tax?

Answer 14

Before thr brought forward annual exemption

Question 15

How is exemption given for an annual exemption?

Answer 15

Given in chronological order to earliest gift(s) made in the tax year

Question 16

The first £5000 given by a parent on the occasion of a wedding?

Answer 16

It is exempt

Question 17

The exempt amount is lower for gifts by other parties in inheritance tax?

Answer 17

£2500 by a lineal ancestor of one aprty of marriage to the other

£1000 by any other person

Question 18

What small gifts are exempt

Answer 18

Gifts of up to £250 per donee per tax year

Question 19

When can exemption not apply?

Answer 19

To gifts exceeding £250 per tax year in total to same donee

Gifts into trusts

Question 20

Is inheritance a tax on transfers of capital?

Answer 20

Yes, not income

Question 21

What happens to cash gifts which are habitual?

Answer 21

Exempt if made out of income, as long as gift does not result in a reduced standard of living of donor