Inheritance tax

Question 1

Exemptions for transfers during life or upon death

Answer 1

Transfers to spouse/ civil partner
Gift to UK charities or qualifying political parties

Question 2

Types of lifetime transfer

Answer 2

Chargeable lifetime transfers - transfers to trusts
Potentially exempt transfers - transfers to individuals (only becomes chargeable if the transferor dies within seven years of making the PET)

Question 3

Gross chargeable transfer

Answer 3

Transfer - exemptions (before NRB) + tax paid by donor

Question 4

Death estate

Answer 4

Assets owned by the deceased when they died less debts and funeral expenses
Includes life assurance policy
Tax payable by personal representatives
NRB reduced by gross chargeable transfers in the 7 years before death

Question 5

Fall in Value relief

Answer 5

Applies when property is transferred within 7 years before death and either
- MV on death is less than when transferred
- Property has been sold by transferee before transferors death and sale proceeds were less than MV when transferred
Transferee can deduct the fall in value from the transfer value when calculating death tax

Question 6

Rolling nil rate band

Answer 6

Reduced by any GCT in the 7 years prior to transfer

Question 7

Quick succession relief

Answer 7

Applied directly to tax on death estate

Question 8

Fall in value relief

Answer 8

Applied to GCT when calculating death tax

Question 9

Residence nil rate band

Answer 9

Applies to residential property left to direct descendants if the property was at some point home to the deceased
Maximum claim is the lower of £175k or the value of the property after liabilities
Reduced by £1 for every £2 an estate exceeds £2m (Nil at £2.35m)

Question 10

Transfer of (residence) / nil rate band

Answer 10

Surviving spouse’s NRB can increase by remaining NRB left / NRB in force
Must be made by the later of:
- 2 years from the end of month of death of the survivor
- 3 years from when the personal representatives first act for the survivor

Question 11

Transfer of value

Answer 11

Value of assets owned by donor pre transfer - value of assets owned by donor post transfer

Question 12

Valuation

Answer 12

Transfer of value = Value of assets owned by donor pre transfer - value of assets owned by donor post transfer
Quoted shares = lower of bid price + 0.25(offer price - bid price) and average of highest and lowest marked bargains
Unit trusts = bid price
Related property = higher of diminution in value when using related property rules vs not

Question 13

Share of related property calculations

Answer 13

Shares = donor shareholding x share price (based on total related shareholding)
Other assets = MV of donor’s asset / (MV of MV of donor + related assets) x total value of related assets

Question 14

Overseas assets in the death estate

Answer 14

Additional admin fees incurred due to asset being located overseas deducted from the value of the asset up to a maximum of 5% of the value of the foreign asset.

Question 15

Business property relief qualification conditions

Answer 15

A qualifying asset
A sufficient ownership period, generally two years, including ownership by passed on death from spouse

Question 16

Business property relief

Answer 16

For shares in a company with expected assets, you can only get business property relief on share value x (net assets - expected assets) / net assets

Question 17

Election for UK domicile pros and cons

Answer 17

No upper limit on spouse exemption for transfers to a UK domiciled spouse (otherwise limit is £325k for transfers to a non-UK domiciled spouse)
vs
The individual’s overseas assets will be brought within the UK IHT charge

Question 18

Double tax relief, given as tax credit against the IHT payable on the overseas asset, is the lower of…

Answer 18

UK tax on the overseas asset
Overseas tax on the overseas asset