Hello
I am thankful we have this opportunity to study and very grateful. the question in concern its in regards to the june 2015 IHT Zoe on the answer the Tapper relief of 4yrs was not given to the PET i thought it was meant to be used please can you loo into it as i will paste it just after this message
QuestionB
Zoe died on 17 February 2015. She had made the following gifts during her lifetime:
(1) On 7 March 2010, Zoe made a cash gift of £270,000 to her son as a wedding gift when he got married.
(2) On 21 June 2010, Zoe made a cash gift of £620,000 to a trust. Zoe paid the inheritance tax arising from this
gift.
Zoe’s husband had died on 25 July 2007, and 20% of his inheritance tax nil rate band of £300,000 for the tax year
2007–08 was not used.
The nil rate band for the tax year 2009–10 is £312,000, and for the tax year 2010–11 it is £325,000.
(b) Calculate the additional inheritance tax which will be payable in respect of the gift made to the trust as a
result of Zoe’s death. (8 marks)
Answer
Zoe – Additional IHT liability arising on the chargeable transfer on death
£
Gross chargeable transfer (working 1) 690,000 W1
–––––––– IHT liability 131,000 (working 2) at nil% 0 W2
559,000 at 40% 223,600 ½
Taper relief reduction – 40% (89,440) 1
––––––––
134,160
IHT already paid (working 1) (73,000) W1 ½
–––––––– Additional liability 61,160
––––––––
Working 1 – Chargeable lifetime transfer
£
Value transferred 620,000
Annual exemption 2010–11 (3,000) ½ –––––––– Net chargeable transfer 617,000
IHT liability 325,000 at nil% 0 ½
292,000 x 20/80 73,000 1
–––––––– Gross chargeable transfer 690,000
––––––––
Tutorial note: The potentially exempt transfer made on 7 March 2010 utilises the annual exemption for
2009–10.
Working 2 – Available nil rate band
£ £
Nil rate band – Zoe 325,000 ½
– Husband (325,000 x 20%) 65,000 1
––––––––
390,000
Potentially exempt transfer
Value transferred 270,000 ½
Marriage exemption (5,000) 1
Annual exemptions 2009–10 (3,000) ½
2008-09 (3,000) ½ –––––––– (259,000)
––––––––
131,000
Ask the Tutor ACCA TX-UK
IHT JUNE ANSWER
There is no taper relief on the PET as there is no IHT payable as the amount of the chargeable transfer (259,000 as shown above) is well within the available nil rate band!!
In this question even if some tax had been payable on the PET and therefore taper relief was available it would be irrelevant as the question only asks for you to calculate the additional tax payable on the CLT!
I think your problem is maybe that you have misunderstood how the relief applies - it reduces the amount of IHT payable it does NOT reduce the amount of the chargeable transfer!!
Thanks loads well understood.
Hi
I've been attempting f6 exam for fifth time and getting same result of failure
Don't know why but it is
Might be my exam technique is wrong or way of understanding is wrong
Kindly please help as I'm planning to giv e again in June
Struggling areas are IHT CGT
Clearly I do not know what you have been doing wrong but from the previous question you asked one clear problem is that this subject is primarily about learning and applying the rules, it is not about asking why is that the rule!
Have you listened to all the lectures in conjunction with the OT notes and then used an approved provider exam kit to practice the questions and develop your exam technique?
Sir i have confusion in the same question
My confusion is that while arriving at the IHT already paid of 75000 for CLT they have used the nil rate band already so why are they using the same nil rate band to cover the PET.
The technical article says that if PET has occured before CLT then the NRB has to be used first for the PET. So aren't we using the same NRB twice ??
Sir can u please expalin me where am i missing out the point??
These are 2 separate computations! We prepare a first computation of lifetime transfers chargeable when made and use the nil rate bands in force in lifetime when calculating any IHT payable on CLT's.
We then do a separate computation on death where we compute the IHT payable on death and apply the nil rate band in force at the date of death and apply it on a chronological basis to the earliest transfers within the 7 years before death, where PET's are taxed for the one and only time and we compute any additional IHT due on CLT's
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