Inheritance Tax - Private Client

Find the value transferred (assets less liabilities) of deceased’s estate, including any PETs and LCTs.

• General rule: property is valued at its open market value – i.e. what price it might have fetched if it had been sold on the open market immediately before death

• Transfers to spouses and civil partners are exempt.

• An unused NRB can be transferred from one spouse/civil partner to another.

• If on death, everything passes on to a spouse/civil partner, no IHT will be payable.

• The assets now form part of the survivor’s estate and whatever remains is taxed on the survivor’s death.

• For any number of small gifts up to 250 per tax year

• Allows people to habitually give away their surplus income without this being an event for IHT

• Must leave the donor with sufficient income to maintain their usual standard of living

• Very commonly used in connection with payment of premiums for life policies written in trust

• Reduces the value transferred by a transfer of value by either:

  • 100% for ‘relevant business property’ (a business or interest in a business or unquoted shares); or

  • 50% for other relevant business property (quoted shares where transferor had voting control immediately before the transfer & land, buildings, machinery, or plant owned personally but used for business purposes of a business of which they had voting control)

• Owned by the transferor for at least 2 years at time of transfer

1. Need not be the transferor’s entire interest

2. Not applicable where the person has entered into a contract of sale;

• Partnership – a partnership agreement providing that the continuing partners will but the former partner’s share on a certain event e.g. death (not a mere option)

• Company – a shareholders’ agreement that the remaining shareholders will buy the share on a certain event e.g. death...