Forums › ACCA Forums › ACCA TX Taxation Forums › potentially exempt transfers
- This topic has 2 replies, 3 voices, and was last updated 12 years ago by raj123nair.
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- April 16, 2012 at 6:35 pm #52231
what is the key difference between potentially exempt transfers and CLT, how do i identify or differentiate them?
April 17, 2012 at 8:54 am #96346PETs are paid directly to individuals. CLT’s (Chargeable Lifetime Transfers) are paid to a trust.
If it’s a PET, no tax is due, unless the donor dies within 7 years, and the gift is more than the available nill rate band.
If it’s a CLT, tax of 20% is due, after taking into account any available nill rate band. If the trust pays the tax, it is simply 20% of the gift. If the donor pays the tax (if I understand it correctly), the tax paid is also a gift, so tax has to be paid on that amount too. Basically, the tax payable by the donor is 25% of the gift. The gross amount of the gift is therefore the value of the gift plus the value of the tax paid. It’s important to keep track of the gross value of the gifts, in case the donor dies within 7 years, and then 40% tax may need to be calculated on the gross transfer (minus any amount previously paid).
April 18, 2012 at 6:30 am #96347You have correctly explained these.
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