INHERITANCE TAX

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INHERITANCE TAX

• Inheritance tax is a direct tax on the gratuitous
  transfer of capital.
• On death the deceased is treated as if,
  immediately before his death, he had made a
  disposition of all the property to which he is
  beneficially entitled

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SIMPLE EXAMPLE
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IHT Equalisation/Redistributionof Estates
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IHT - EXEMPTIONS

• Dispositions for maintenance of the family
• Waiver of remuneration and dividends
• Deeds of family arrangement
• Husband/wife transfers
• Gifts to charities, political parties or housing
  associations
• Gifts for
• National purposes
• To preserve the national heritage

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IHT - Chargeable Transfers

• Chargeable Transfer
• Any transfer of value other than an exempt
  transfer
• Transfer of Value
• Any disposition which reduces the value of the
  transferors estate
• Value transferred
• Amount of reduction in estate value

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Quoted shares

• Valued at the lower of
• quarter-up rule
• mid-point between highest and lowest recorded
  bargains for the relevant day
• Unit trusts are valued at the selling price
• (lower price)

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Business Property Relief (BPR)

• Conditions
• Owned for two years before transfer (or 2 out of
  5 years for replacements)
• 100 relief
• unincorporated business
• unquoted shares in a company
• 50 relief
• quoted controlling shareholdings
• land, buildings, machinery or plant used by
  company of which transferor had control or by
  partnership of which he was a partner

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Agricultural Property Relief (Land, farm
buildings, cottages and farm houses)

• Conditions
• Occupied by transferor for agricultural purposes
  for previous two years (or 2 out of 5 years for
  replacements)
• Owned by transferor and occupied by anyone for
  agricultural purposes for previous seven
  years(or 7 out of 10 years for replacements)
• 100 relief on agricultural value
• right to vacant possession now or within 1 year
• property is let on tenancy commencing after
  31/8/95
• 50 relief in any other case

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BPR Exclusions

• Businesses which do not qualify
• investment holding or dealing or property dealing
• Excepted assets
• Companies being wound up or liquidated unless
  their business is going to continue
• A binding contract for sale exists at time of
  transfer unless it is a reconstruction or
  amalgamation or an incorporation which will give
  the transferor control of the company
• The transfer is a PET which becomes a CT and the
  transferee no longer owns the RBP

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BPR Restriction for excepted assets
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Deemed Domicile Provisions

• An individual is domiciled in the UK for IHT
  purposes if
• he was domiciled in the UK at any time during the
  3-year period preceding the transfer
• he was UK resident for at least 17 out of the 20
  tax years up to and including the year of
  transfer
• Property situated outside the UK and beneficially
  owned by a non-UK domiciled person is excluded
  (left out of account)

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