Q#2 Of June 2015

IHT liable at Nil % refers to Nil Rate Band of 325K. In this case CLT was 620K. One annual exemption of current tax year of 3K is available. Therefore net CLT = 617K less Nil Rate Band of 325K = 292K is the immediately taxable value of the CLT.

The rule is, whenever unutilised Nil Rate Band is calculated, latest threshold of Nil Rate Band is adopted, which is 325K. The 300K given in the question is just to confuse the student.

Thank you lakshmana... :)

Dear ema, IHT liability at nil % refers to Nil Rate Band. For every individual upto 325K of estate is exempt from IHT. If spouse has not used this amount fully, then the balance accrues to the living spouse. So whenever you give a CLT, 325K and annual exemption if avilable can be deducted, and on the excess amount you have to pay tax immediately at 20%, which is called life time tax. The working for 292K is as below. The CLT was 620K. One annual exemption only is available, since the PET given earlier to CLT has taken the AE for previous year. (AE is carried forward for one year and in most problems it works out 3K+3K = 6,000). The taxable CLT is thus 620K less Annual exemption of 3K = 617K less 325 Nil Rate Band (NRB) = 292K. Normally tax tutor don't want students to answer queries here. Since you helped me previously, I am pitching in with whatever I can.

I already understood the concept earlier after those point highlighted by you.... thanks for your benevolence...