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IHT Annual Exemption

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › IHT Annual Exemption

  • This topic has 3 replies, 3 voices, and was last updated 3 years ago by Tax Tutor.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 31, 2022 at 10:49 pm #657017
    maddi93
    Participant
    • Topics: 5
    • Replies: 5
    • ☆

    Hi,

    I did a mock test on the ACCA practice platform and wondered why the below answer is correct regarding annual exemption. The question was:

    How will the 2019-20 and 2020-21 annual exemptions be applied to these transfers?
    The answer was: £400 set against the gifts to her nieces, £5,600 against the gift to her daughter

    (2) On 2 May 2020, Marwa made cash gifts to her three nieces. The first niece was given £100, the second niece was given £200, and the third niece was given £400.
    (3) On 14 September 2020, Marwa made a gift of 6,500 £1 ordinary shares in Amaranth Ltd, an unquoted investment company, to her daughter.

    I assumed the answer would be £300 (£100 + £200) AE against the small gifts to the two nieces as below £250 each and £6,000 (£3,000+£3,000) regarding the gift to her daughter.

    June 1, 2022 at 10:03 am #657055
    tabasumze
    Participant
    • Topics: 40
    • Replies: 48
    • ☆☆

    The small gift exemption of £250 per donee per tax year applies to the gifts made to two different nieces (i.e neice 1 & 2)

    The 3rd niece is gifted £400 where the Small gifts exemption does not apply and Annual exemption therefore applies.

    Since the gift to 3rd niece was made before the gift of shares, annual exemption of £3000 (current tax year’s) is applied and remaining £2600 is left for further use.

    When she gifts the shares to her daughter,
    Total available annual exemption is therefore, £5600 (£2600+£3000)

    Note: The £3000 annual exemption is of previous tax year’s.

    To use the previous tax year’s annual exemption, current year’s annual exemption is to be fully utilised first..

    I hope you understood.

    June 1, 2022 at 11:20 am #657060
    maddi93
    Participant
    • Topics: 5
    • Replies: 5
    • ☆

    Thank you very much!

    June 3, 2022 at 10:31 am #657225
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Tabasumze’s answer is correct.

  • Author
    Posts
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