Capital Taxation IHT Flashcards
(25 cards)
What is IHT?
IHT is a tax on the estate of someone who has died.
When is IHT normally not payable?
1) The value of the estate is below the £325,000 threshold.
2) You leave everything above £325,000 to your spouse, civil partner, charity or a community amateur sports club.
What happens if you give your home to your children or grandchildren?
Your threshold can increase to £50,000.
What is the IHT rate?
40%
What is a IHT valuation?
A valuation undertaken by a RICS qualified CS and is used to determine the tax that must be paid on an estate before it passes on to the beneficiaries.
What reliefs are available for IHT?
1) Quick succession relief
2) Agricultural and Woodland relief
3) Business property relief
4) Taper relief
What happens if your pass your home to your spouse?
No IHT to pay.
What happens if you pass your home to your children, grandchildren or if your estate is worth less than £2 million?
Your tax-free threshold can increase to £500,000.
If you give away your home before you die, how long do you need to stay alive?
7 years
If your stay in the house you give away, you need to do what?
1) pay rent at the going rate
2) pay your share of the bills
3) live there for at least 7 years
If you give away your home, when do you not have to pay rent to the new owners?
If both of the following apply:
1) you only give part of your property away
2) the new owners also live at the property
What is a gift of reservation?
A gift of reservation is where you give something away but continue to benefit from it.
What happens if you die within 7 years of giving away your property in part or whole?
Your home will be treated as a gift and the 7 year rule applies.
What is the statutory basis of IHT?
Inheritance Act 1984
Where can the definition of market value for IHT purposes be found?
S 160 IHTA 1984
What is the statutory basis of value for IHT?
Market value
What is the definition of market value under VPGA 5 for these properties?
The price which the property might reasonably fetch if sold in the open market at that time, but that price must not be assumed to be reduced on the ground that the whole proeprty is to be placed on the market at one and the same time.
What did the Clay case set out and what did Walton v IRC say?
That the effects of a special purchaser can be taken into account for IHT purposes.
This was expanded in Walton v IRC in that special purchasers have to be real not hypothetical.
What is the date of valuation for IHT?
The moment before death. This was designed to ensure interests that terminate on death are treated as aprt of the estate.
What is the nil rate band for IHT?
The value of an estate that is less than £325,000.
Can the nil rate band for IHT be transferred?
Yes, if your estate is being inherited by your spouse or partner they inherit your nil rate band.
When is the standard 40% rate used in IHT?
On amounts over £325,000
What is exempt from IHT?
1) Foreign properties owned by a person living abroad
2) Transfers between husband and wife or between civil partners
3) Annual exemption of £3,000 for lifetime transfers
4) Outright gifts up to £250 to any one person
5) lifetime trasnfers as wedding gifts
6) Transfers to charities
What does undivided shares mean in IHT?
Where a land interest has joint owners or owners in common where each owner shares an entitlement to a share in the property. Such shares are held under a trust of land.
