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sir I did not understand even the basic concept of IHT. who pays IHT, donor or donee ? and assets are inherited after death so how is it possible to pay IHT?
in book it is said, a charge to IhT arises
on the death of individual. so how tax is possible to pay on the death of individual?again,IHT arises on lifetime gifts where the donor dies within 7 years of the date of a gift. what does this mean
I watched video but could not get the point.
IHT arises on lifetime gifts where the donor dies within 7 years of the date of a gift = This means, there is IHT is payable on gifts given to individuals by an individual(PET)if the donor dies within 7 years of giving the gift. For example, if A gives gift to B this year, and if A dies before 2022 then, B has to pay IHT on the gift. But If A is still alive on and after 2022 there is to IHT payable
A owns 60% of the shares in A Ltd. A Ltd has 100,000 £1 ordinary shares in issue.
Share valuations have been agreed as follows: 20% £10 per share 40% £15 per share 60% £25 per share 80% £40 per share
Compute the transfer of value if A were to die leaving his shares to his daughter, or alternatively if he were to make a lifetime gift of 20,000 shares to his daughter.
sir in 2nd ques, why don’t we calculate transfer value by 20000*10 =200000 because 20% of share is transferredI have to agree with you – you do not indeed understand the basic concepts of IHT and I think you need to go back to the lecture and try again to listen to what was said and how we approach the questions.
In respect of your specific issues here:
1) regarding the example given by rk85 and your related comment then if a taxpayer makes a gift in lifetime and tax then becomes payable on the death of donor it is indeed the donee who has to pay the tax
In respect of the assets still owned by the taxpayer at the date of death – the chargeable estate – it is the exexutors / personal representatives of the deceased who have to administer the estate and then make the payment of IHT to HMRC by taking the money out of the estate. There is therefore less remaining in the estate to go to the beneficiaries meaning that the beneficiaries have effectively “borne” the cost of the tax.
2) The transfer of value is “the loss to the estate of the donor” measured as the difference between what the donor had BEFORE the transfer and what he had AFTER the transfer. Though usually this is the same as the OMV of the asset being gifted we explain that this is NOT always the case – hence this example to illustrate, which is fully demonstrated in the lecture so I would ask you to go back and listen very carefully to the lecture.
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