Inheritance Tax (7) Flashcards
When does the residence nil rate band apply?
Where a “main” residence is held within the death estate and is inherited by direct descendants
What is the value of the main residence?
After deducting any repayment mortgage or interest-only mortgage secured on that property
If a main residence is valued at less than the available residence nil rate band?
Then residence nil rate band is reduced to value of the residence
If partner died prior to introduction of RNRB (6 April 2017)?
Any unused proportion of RNRB on death of a partner can be transferred for use against surviving partner’s estate
What must taxpayer think about as chargeable estate is charged at 40% above the nil rate band?
Taxpayer must think about succession planning to minimise what may be a significant IHT liability arising upon death
Why are lifetime transfers useufl?
Easiest way to reduce the IHT liabiltiy that would arise on death
if an individual makes regular lifetime gifts to others out of his income?
These transfers will be exempt as normal expenditure out of income
What can a taxpayer take advantage of when it comes to regular lifetime gifts?
An annual exemption of £3000 and a marriage exemption
PET gift (liability)
No immediate IHT liability will arise, and these transfers become chargeable if donor dies within 7 years of having made them
PET gift (transfer)
If individual dies within 7 years the value of the transfer is frozen at the time of the transfer. These assets will likely increase over time
PET gift (taper relief)
If donor survives for at least 3 years, any IHT payable is reduced by taper relief
If an asset is exempt asset?
No chargeable gain arises
If an asset is a chargeable asset?
There will still be no CGT liability if net gains for a tax year are covered by AEA of the taxpayer
If gains would exceed AEA?
Reliefs may be available to exempt or defer the gains from chargeability
What is advantageous to taxpayer (transfer)
Take advantage of exempt transfers to a partner
