Inheritance Tax

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  • Inheritance Tax
    • 3 occasions IHT is charged:
      • 2) On lifetime gifts made to an individual - 7yrs prior to death
        • Certain gifts are charged  IF the donor dies within 7yrs of making them
          • When the transfer is made - no IHT is charged
            • Considered potentially exempt
              • Becomes exempt if you survive 7yrs
      • 1)  On death
        • When an individual dies - IHT is charged on the value of the estate
          • ASSETS less LIABILITIES
            • Subject to various exemptions and reliefs
      • 3) On lifetime gifts to a company or into a trust
        • IHT may be avoided by use of trust i.e. for a disabled person
          • At present - its immediately chargeable
    • IHT charged at 'the value transferred by a charegeable transfer' s1,s2
      • STEP 1: IDENTIFY THE TRANSFER
        • Lifetime = any disposition which reduces the value of the transferor's estate
        • Death - tax charged as if deceased made transfer of value on estate
      • STEP 2: FIND VALUE TRANSFER
        • Death = value of estate
        • Lifetime = reduction on transferors' estate
      • STEP 3: APPLY RELEVANT EXEMPTION/RELIEFS
        • Example: Spousal Transfers or Annual Exemption
          • These reduce IHT
      • STEP 4: CALCULATE TAX AT APPROP. RATE
        • NRB: £325K
          • Tax applies to excess of this
          • Sometimes not all the NRB is available
            • Look back 7 yrs prior

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