TAX - Chapter 24 - Example 2 ! Help please

Answer to Example 2 £243,200 The gift on 1 October 2008 to her son is a PET. This was not chargeable when made nor will it be chargeable on death as Dee survived for the required 7 years. The transfer is therefore exempt but will be deemed to have used the Annual Exemptions for 08/09 and 07/08 The gift on 1 June 2009 is a CLT and was chargeable when made but not on death as again Dee survived for 7 years. The gift on 1 September 2015 is a PET and will be chargeable on death as Dee died within the next 7 years. Step 1 Compute the Chargeable Transfers Transfer of value Less: Exemptions AE 09/10 AE 15/16 AE 14/15 Chargeable Transfer AE 08/09 will have been applied to the 1 October 2008 PET despite it never becoming chargeable. 1/6/09 CLT 336,000 1/9/15 PET 296,000 (3,000) (3,000) £ Gross IHT Transfers 333,000 335,000 2,000 333,000 (3,000) 290,000 Step 2 1/6/2009 325,000 8,000 Lifetime Transfers Chargeable When Made CLT @ nil @ 25% = nil = 2,000 As the donor, Dee, paid the IHT, the transfer is a net transfer and therefore the excess over the nil rate band is taxed at 25% ACCA Taxation (TX-UK) (FA2019) Answers to examples Paper TX-UK Step 3 Lifetime Transfers Chargeable on Death This is the hardest part of the question and requires us to firstly determine the earliest transfer within the 7 years before death as the starting point. In this example there is only one such transfer the PET on 1/9/15. However in computing any IHT payable on this transfer we must take account of what nil rate band is available after firstly deducting from it any CLT’s made within the 7 years of this transfer: 213 CLT 7 years < 1/9/2015 1/9/2015 PET No available nil rate band = 290,000 @ 40% Less: Taper Relief ((5-6 years) 60%) = 116,000 Gross Transfers 335,000 290,000 116,000 625,000 (69,600) 46,400 IHT Although the CLT of 1 June 2009 has drastically affected the tax payable on the PET of 1 September 2015 it will only be relevant for transfers within the following 7 years hence any transfer after that date (1 June 2016), or as here the Chargeable Estate, will not take account of this earlier CLT in computing any IHT payable. The 7 year cumulation period at the date of death will only therefore consider the PET of 1 September 2015 in determining any available nil rate band. As there is no mention in the question of a main residence being included in the estate at death there is no residence nil rate band to apply. Step 4 Chargeable Estate at Death – 1 March 2021 Chargeable Estate Available nil rate band = 325,000 – 290,000 = 35,000 IHT on Estate 35,000 @ nil = nil 465,000 @ 40% = 186,000 500,000 The above is the answer to Example 2 in Chapter 24. Why is the 290,000 being deducted from 325,000 even though the NRB did not get used in September 2015? Should not there be a full use of NRB in 2021 March (when he dies)? Thank you