acca pp dec 2016

Roman died on 7 August 2015, and his wife Paris died on 18 February 2016.

The couple had attempted to mitigate their inheritance tax (IHT) liabilities when they both made substantial gifts during 2013. These gifts made full use of their respective nil rate bands of £325,000, but unfortunately neither Roman nor Paris then survived long enough for any of the gifts to benefit from taper relief. Neither Roman nor Paris had made any previous lifetime gifts.

Roman

On 4 March 2013, Roman made a cash gift of £210,000 to his daughter. On 26 August 2013, he made a cash gift of £190,000 to a trust. No lifetime IHT arose in respect of the gift to the trust.

Roman’s estate for IHT purposes was valued at £560,000. Under the terms of his will, Roman left £300,000 to Paris (his wife) and the residue of his estate to his daughter.

Paris

On 12 December 2013, Paris made a gift of 75,000 £1 ordinary shares in Capital Ltd, an unquoted investment company, to her son. Before the transfer, Paris owned 100,000 of Capital Ltd’s 250,000 ordinary shares. The market value of Capital Ltd’s ordinary shares on 12 December 2013 was as follows:

Holding
Market value per share
10% £5
30% £6
40% £8
Paris also made cash gifts of £80, £210, £195 and £460 to various friends during February 2014. The gifts of £80 and £195 were to the same friend.

Paris’ estate for IHT purposes was valued at £840,000, including the inheritance from Roman (her husband). Under the terms of her will, Paris left a specific legacy of £20,000 to a friend and the residue of her estate to her grandchildren.

1 How much IHT will be payable in respect of the gift made to the trust by Roman as a result of his death?

£26,400

£30,000

£27,600

£13,200