- June 9, 2020 at 10:03 am
I am a bit confused re your Nil Rate Band of IHT working for example 1 in your opentuition notes.
Now on 15/7/2015, when Joe made the chargeable lifetime transfer of £405,000 into a trust, the £325,000 nil rate band was already used up to calculate IHT liability for lifetime transfers chargeable when made.
How was it still available to attract relief when we work on the Lifetime Transfers Chargeable on Death?
I thought on the video lectures, you said CLT made within 7 years of death will have impact on the nil rate band available for relief?
Thanks.June 9, 2020 at 12:23 pm
These are 2 separate computations as shown in illustrations 11 and 12 which precede this example and which method is stated in the section 8 note on the approach to an exam question – please go back and review.
The lifetime transfers chargeable when made computation establishes what if any IHT is payable in lifetime on the CLT using the lifetime rates – the lifetime transfers chargeable on death computation computes what if any ADDITIONAL tax is to be paid as a result of the death of the taxpayer using the death rates and deducting any lifetime tax paidJune 9, 2020 at 12:53 pm
I understand your point about additional IHT to be paid as a result of the death of the taxpayer. I reviewed your notes several times but still cannot get why the nil rate band of £325,000 is available to attract PET and CLT relief for computing the chargeable transfers on death, when £325,000 was already used up when dealing with the CLT when the chargeable transfers was made, and it was made within 7 years of Joe’s death.June 10, 2020 at 3:46 pm
We are not using the NRB “twice” as you suggest we are using the NRB once in each of 2 separate computations.
The first is to see what if any tax is payable in lifetime on CLT’s applying the lifetime rate in force at that date (a gross figure of 20%) and looking at what other CLT’s were made within the 7 years of that transfer in determining how much NRB is available.
The second computation is to compute what if any tax is payable on lifetime transfers (CLT’s and PET’s) made within the 7 years of death, charging IHT at the death rate of 40% on transfers above the cumulative total of the available NRB at death on PET’s and as stated previously for CLT’s deducting any lifetime tax to determine whether any additional tax is payable on death
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