Chapter Four - Inheritance Tax Flashcards Preview

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Flashcards in Chapter Four - Inheritance Tax Deck (10)
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1

When can you use the Annual Gift Allowance of £3,000?

This can be used on any gifts, whether it is a PET or a CLT

2

If you make a gift to charity 10% greater than taxable estate, you can pay IHT at 36%, how do you calculate this?

Total estate (including charity gift) less exemptions and spouse exemptions less NRB/RNRB = Taxable Estate
If the gift / Taxable Estate is more than 10%, can tax at 36%, if not then tax at 40%. Remember to take off the charity gift from the taxable estate once charity test has been done.

3

What is Quick Succession Relief?

If you die within 5 years of receving someones estate, you can get relief on your estate to avoid double taxation.
The forumla is amount of IHT paid X Value (minus tax) divided by value + tax then multiplied by the relief depending on the number of years

4

How do you calculate how much of the NRB can be transferred to spouse if part of it has already been used?

Amount used / NRB at the time then multiply by £325,000 (current NRB)

5

What is Business Relief?

Relief on transferring business or shareholdings, which can be 100% or 50% and need to be held for 2 years

6

What qualifies for 100% Business Relief and what qualifies for 50%?

100% is for sole trader and partnership businesses or high risk shares, such as quoted companies, AIM, EIS ror VCTs. 50% is for shareholdings in listed companies

7

What is Agricultural Relief?

This is for land crops anf farm buildings and the relief can be 100% or 50% and it must be held for 2 years or 7 years if it has been let out.

8

What qualifies for 100% and 50% Agricultural Relief?

100% is for any land / farm that has been held for 2 years and 50% for rented out land, but it will be 100% if tenancy exceeds 12 months

9

What is Gift with reservation?

When you make a gift but still benefit from it. i.e. a holiday home. The gift will remain in the settlors estate until they stop benefiting from the asset. Once they stop benefitting, the gift will become a PET.

10

What is the rule with spousal exemption and non and UK domiciled?

If the person who dies is a UK domicile and the partner is a non-uk domicile, spousal exemption isn't available. The surviving partner will be given an exemption of £325,000.