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Hi! Good day.
I’m a bit confused about Inheritance Tax on how to compute Gross Chargeable Transfer because in Illustration 3 if the donor pays the tax, the calculation is Taxable Amount +Lifetime tax@25%=GCT but in example #1 the calculation is Chargeable Amount +Lifetime tax @25%.
And also in Illustration 3 he transferred 400k but in the calculation Transferred value is 450k. Did I missed some information there? Thanks in advance.
example 1 – CLT the donor pays the tax so it’s charged at 25% and the tax is added to the chargeable amount
illustration 3 – the trustees pay the tax so it’s 20% – you are right about the discrepancy in figures – ignore 400k use 450K
Hi! Thank you for the clarification, appreciate it so much, but im still confused about Illustration 3 with the statement that what if the donor is the is the one paying for the IHT
on the other hand, the donor – Ronald had agreed to pay the IHT then his estate would have
diminished, or reduced by both the gift and the tax.
Taxable amount 119,000
Lifetime tax @25% 29,750
Gross chargeable amount to carry forward 148,7501. Trustees pay the tax so 20% per illustration
2. Donor pays the tax so 25% and added to £119,000 to c/fwdThis is becasue of the diminution principle – the loss to the donor. The estate if Ronald pays, has gone down twice – once with the gift and then again becasue he paid the tax out of his bank account and is 29750 worse off
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