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Illustration 8
Kay Babb made a chargeable transfer into a trust of £400,000 in June 2012. She has made no previous lifetime transfers. The nil rate
band in the 2012/13 tax year was £325,000.
Compute the amount of IHT payable, assuming firstly the trustees paid any IHT due, and then that Kay paid any IHT due.
Lifetime Transfers Chargeable When Made
£ Gross Transfers IHT
CLT 400,000 400,000 15,000
325,000 @ Nil = Nil
75,000 @ 20% = 15,000
If Kay paid the tax the frst £325,000 is still within the nil rate band but the excess £75,000 is now taxed at 25%. This tax is then added
to the £400,000 to establish the gross amount of the gift:
CLT 400,000 418,750 18,750
(75,000 x 25% = 18,750)In the above illustration I don’t understand where the 25% comes from and how you calculated it.
Thank you anon39 for your assistance here to Janis – if Janis you refer back to the note immediately preceding this example – the final paragraph of section 6 on page 142 explains that the net rate of 25% is applied when the DONOR pays any tax due on a CLT
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