IHT Flashcards
(63 cards)
IHT calculation for transfer on death
- transfer - anything in estate, survivorship or beneficially entitled. nothing written in trust for someone else
- value - market value. discount jointly owned property Deduct debts / liabilities/expenses
- reliefs / exemptions - nil rate band 325k, RNRB 175K, business relief, charity relief, spouses, agricultural relief
- calculate tax NRB (consider 7yrs previous and anything unused by spouse) and then 40% remainder or 36% if 10% of net estate goes to charity
IHT calculation for PET
1 transfer - anything individual to individual or into disabled trust. not for maintenance or education of child or dependent
- value - market rate. related property rule applies
- reliefs / exemptions - business, agriculture, charity, spouse, small gifts 250, normal expenditure, marriage, annual exemption 3k or max 6k
- rest is PET but chargeable is dies within 7 years
marriage exemption amounts
parents 5k
remoter ancestors 2.5k
anyone else 1k
impact of business relief if original owner dies within 7 years
if new owner no longer owns it then business relief is revoked but if they still own it then no impact
or if the new owner dies before original owner must own item on the new owners death
IHT calculation for LCT
1 transfer - into company or trust (not disabled trust) anything that isn’t a PET
2 value - market rate
3. exemptions reliefs - same as PET - no small gifts relief
4. calculate NRB (consider LCT in past 7 yrs but not PET) Rest taxed at 20%
when does RNRB not apply
not applicable to PET or LCT
not if estate value is too high - reduce by £1 for every £2 over 2m
Effect of death on PET
consider removing business rate relief
calculate NRB - PET that become chargeable and LCT in 7 years before transfer in question
tax at 20%
Apply tapering relief
tapering relief
1-2: 100% 2-3:100% 3-4:80% 4-5:60% 5-6:40% 6-7 years : pay 20% of charge
effect of death of LCT
recalculate if die within 7 years of transfer
consider removing business relief
calculate NRB (consider chargeable PET and LCT within 7 years of transfer in question)
tax at 20% - use lower rate if different at time of death and time of transfer
apply tapering relief
give credit for any IHT paid at time of transfer
what if IHT on a LCT is lower when recalculated at time of death than it was when paid at time of transfer
no refund
what is the estate rate
the average rate of tax applicable to each item of property in the estate
how to calculate the estate rate (percentage)
total amount of IHT paid / total chargeable estate x100
how to calculate estate rate (amount for item)
total amount of IHT paid / total chargeable estate X value of item
who is liable for the IHT on the property in a trust immediately before the death
Trustee and anyone in whom the trust property subsequently vests or for whose benefit the property is subsequently applied are concurrently liable
how long do you have until IHT is due
IHT is due 6 months after the end of the month of death
can you obtain a grant before paying IHT
no - must pay IHT before obtaining a grant
do you pay interest on IHT
only if not paid within the 6 months
if IHT is paid in instalments, how many instalments are there and when is the first one due
10 instalments
first is due 6 months after the end of the month of death
how to calculate how much IHT is attributable to the instalment property
use estate rate
which property is eligible for IHT instalments
land
businesses or interest in business
any shares that control company
any unquoted uncontroling shares if they are worth 10% of nominal shares of company and worth 20K or payment in one go would cause hardship
IHT attributable to the shares and any other installment property amounts to at least 20% of the IHT payable on the estate
is interest payable on installments
For shares, business property or agricultural land - interest is due only if not paid on time
for all other installment property - interest is payable on outstanding amount of IHT as well as if not paid on time
do the outstanding IHT instalments become due if the instalment property is sold
yes all outstanding tax and interest becomes due
how long to pay IHT on a PET
6 months after end of month of death
how long to pay LCT
if transfer made 5 April - 10 Oct then pay by 30 April following year
if made outside those dates then 6 months after end of month in which LCT is made
additional LCT payable on death due 6 months after end of month of death
