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7 year cumulative rule Kaplan kit (FA20) Q204 #2

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › 7 year cumulative rule Kaplan kit (FA20) Q204 #2

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by twinkling.
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  • Author
    Posts
  • September 1, 2021 at 1:13 pm #633796
    twinkling
    Participant
    • Topics: 4
    • Replies: 3
    • ☆

    Hello Sir, may you please help me understand why the answer only deducted the value of CLT on calculating the available NRB.I thought that since the PET and the CLT where made before the CLT in question then both will affect the available NRB according to the 7 year cumulative rule.
    Afiya then made various other gifts such that as at 26 January 2020 the total gross
    chargeable value of all transfers made in the previous seven years was £220,000
    comprising potentially exempt transfers of £100,000 and chargeable lifetime transfers of £120,000.
    On 27 January 2020, Afiya made a transfer of value (after all exemptions) of £400,000
    to a trust. Afiya paid the inheritance tax arising from this gift.
    answer
    Transfer of value (after all exemptions) 400,000
    NRB at date of gift 325,000
    Less: GCTs in last 7 years (CLTs only) (120,000)
    ––––––– (205,000)

    September 2, 2021 at 11:38 am #633966
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    PET’s are only taken into account in computing the available nil rate band when calculating the IHT payable on the DEATH of the transferor – and even then ONLY if they were made in the 7 years before death.
    When, as here, simply computing the IHT payable in LIFETIME on a CLT, you only consider other CLT’s made in the 7 years before the transfer in establishing the available nil rate band – PET’s are ignored.

    September 3, 2021 at 7:29 am #634065
    twinkling
    Participant
    • Topics: 4
    • Replies: 3
    • ☆

    thank you so much Sir this was very helpful

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