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In chapter 24 of the course note Example 2, why was the nil tax rate band of 325,000 use instead of 312,000 for 08/09 tax year as required by the question.
Thank you
The transfer in 08/09 is a PET. PET’s only become chargeable on death. In computing the IHT arising on the death of the taxpayer we use only the nil rate band in force at the date of death!!!! It is only when taxing CLT’s in lifetime, as in step 2 of the answer that you use the nil rate band in the tax year of the transfer! The question provides you with the nil rate band for 08/09 to test whether you know NOT to use it as this is what the examiner does in his exam questions!!
In the same example 2, after deducting Taper relief, why is it that lifetime tax paid of 3000 has not been deducted?
Thank You
Because there is no IHT payable on the CLT on death as it is all within the nil rate band! For the same reason there is NO taper relief either on the CLT as again this too is only a deduction from any tax charge that arises! Remember we do not deduct taper relief or lifetime tax from the gross chargeable transfer, we deduct them from any tax that is payable. See how the taper relief applies on the PET that follows and understand that there is never of course any lifetime tax paid on PET’s
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