● Lifetime Gifts to individuals (PET) No lifetime tax If death within 7 years then

death tax
● Lifetime Gifts to trust (CLT) There is lifetime tax Death within 7 years there is
death tax
● Annual exemption amount is $3000 and unused AE can be c/f upto one year only
● If nothing mentioned in case of CLT then DONOR PAYS TAX 25%
● If mentioned for DONEE then 20%
● NRB of 20/21 is 325,000 which will be reduced by any chargeable transfer in the last
7 years of the gift.
● Death tax is paid @ 40% and any amount of tax paid in lifetime will be deducted from
death tax, also taper relief will be available on death tax i.e only chargeable CLT and
PET depending on:
IF DEATH IN 0> <3 years of gift 0%
3> <4 years of gift 20%
4> <5 years of gift 40%
5> <6 years of gift 60%
6> <7 years of gift 80%
7 years 100%
● If donee pays tax in CLT then GCA on death will be Chargeable amount after AE
and before NRB.
● If the donor pays tax in CLT then GCA on death will be the chargeable amount after
AE and before NRB + TAX paid in lifetime.
● Due date of death tax is 6 months after the end of the month of death
● Normal computation of death estate
Assets xxx
L:Liabilities (xx)
L:Funeral expenses (xx)
Total death estate xxx
L:Gift to exempt parties (xx)
Chargeable death estate xxx
*Exempt parties include:
1) Spouse/civil partners
2) Charity
3) Political party(if in last election 2 members were elected from house of
commons, or one member was elected with at least 150000 votes cast for the
party)
● –All assets are valued at Market value
–Shares and securities are valued at lower off:
1) Quarter up rate= Lowest quote + (Highest quote - lowest quote)/4
2) Average bargain price= (Highest bargain price- lowest bargain price)/2
–Loan notes, shares and securities are always at cum prices
–Mutual fund units are valued at lower bid price.
–Insurance policy se koi bhi paisa mile will be included in estate value, but life
assurance policy se benefit jo he exclude hojayega estate se.
● Liabilities: All debts included except endowment mortgage,illegal debt,loan due to
gambling etc.
● Funeral expenses are allowable provided they are reasonable.
● Reduction of IHT rate to 36%
 If donation to charity is equal to 10% of the baseline amount then the IHT rate will
reduce to 36% for death estate.
Net chargeable estate
Chargeable death estate xxx
A: Charity xx
L: Available NRB (xx)
Baseline amount xxx

● If a spouse dies their percentage of unused NRB can be utilised by another spouse
i.e other spouses NRB will increase by the unused % of dead spouse.
● Related property
–Property is a related to donors property if it is of similar kind owned by the
1) Donors spouse or civil partner
2) An exempt body (charity,qualifying political party etc)
–Property held by exempt body is deemed to be related for as long as the body owns
the asset and,
–For five years after disposal
–The related property valuation apply to valuation of
a) Unquoted shares
b) Collection of antiques and chattels
c) Adjacent plots of land

Related property valuation= A/A+B x (value of total combined assets of similar kind)
Assets other than shares Shares
A= value of donors asset No. of shares held by donor
B= value of related parties assets No. of shares held by related parties

● BPR relief:
When a business is gifted BPR is available for IHT purpose so it can be:
1)Unincorporated business (100% relief)
2)Unquoted shares(100% relief)
3)Quoted shares where donor has control(of related property too)-(50% relief)
4)Land,building,plant machinery used in business if carried on by :
i)a company in which donor has control
ii) A partnership in which donor is a partner

–Any unincorporated business will qualify if it is a trading business.

–Any company's shares being gifted must be of trading companies.
–To determine control,related property holdings must be considered.
–BPR is not available on assets which are in a binding contract for sale at the date of
gift.

a)Ownership period of donor should be 2 years

b)If a donor completes a 2 year requirement then this requirement is waived for
subsequent donors,this is called successive transfer.
c)If an asset was inherited on death of spouse or civil partner,the couples combined
ownership period should be 2 years or more.
d)BPR is available on worldwide assets
 e)BPR is deducted before annual exemptions or any other reliefs and is available on both
lifetime and on death day.
f)If you replace a non qualifying for BPR business property with a relevant business
property(jispe BPR milega) then combined period of ownership should be at least 2 years
out of last 5 years.BPR WILL BE GIVEN ON LOWER OF TWO PROPERTY VALUE.
g)BPR is not available on gift of investment business( business dealing in shares, stocks
land and building or investment assets.
h) If donee sells business before death of the donor, then BPR will be withdrawn ,
however if donee reinvests proceeds in another business then BPR will be available.
i)NOTE(WITHDRAWAL OF BPR)
The relevant business property is not used for business purposes at the date of death of
the donor.
Business property has been sold by donee before death of donor and replacement
business property was not purchased

BPR = VALUE OF TRANSFER x BUSINESS ASSETS/TOTAL ASSETS X BPR %

● APR relief:

1)APR is 100% when UK agricultural property is gifted

2)APR holding period is 2 years if donor is doing agriculture
3)If agricultural property is let out, then holding requirement is 7 years
4)APR only on agricultural value of property
5)APR is available on personal use and letting although no BPR will be available
6)If a donor completes a 2 year requirement then this requirement is waived for
subsequent donors,this is called successive transfer.
7)Business property has been sold by donee before death of the donor ,APR will be
withdrawn,however if donee reinvests proceeds in another business APR will then be
available.
8)If an asset was inherited on death of spouse or civil partner,the couples combined
ownership period should be 2 years or more.
9)If you replace a non-qualifying APR business property with a relevant business
property(jispe APR milega) then
the combined period of ownership should be at least 2 years out of the last 5 years,IF
FARMED BY OWNER
The combined period of ownership should be at least 7out of the last 10 years, IF FARMED
BY A TENANT.
10) APR is also available in respect of shares in a farming company provided that the
individual has control(Related property concept will be applicable too)over the company and
has held the shares for at least 2 years.
APR SHOULD BE TAKEN BEFORE BPR AND ALL RELIEFS

● Marriage exemptions:
-Parents=5000 each
-Grandparents 2500 each
-Bride/Groom=2500 each
-Other relatives=1000 each
 ● RNRB= 175000 Available only after 6 April 2017 only if main residence left to
children and grandchildren
RNRB will be withdrawn if net value estate( before deducting APR,BPR and
exemptions) exceeds 2 million at ½ of excess. The RNRB will be reduced to nil when
net estate is 2350000 or more.

● GWR(Gift With Reservation)

-A GWR is a lifetime gift where legal ownership of an asset has been transferred but
the donor retains some benefit of the asset gifted
-HMRC will assess on the time of the donor's death where tax was higher,
If treated as a lifetime gift or
If treated as a death day gift
-However GWR won't be applicable if the donor gives rent for the usage or has
serious illness.

● FIV(Fall In Value Relief)

-If the value of asset falls after making a lifetime gift then FIV relief will be available
for death tax purposes.
-FIV=MV at gift date(chargeable amount) - MV at death date
-To qualify for FIV relief:
–The asset must either be owned by the donee at date of donors death OR
–It was sold in an arms length transaction before the donor died.

● Variation of will:
-Will of a person can be changed to save IHT
-Variation needs to be done within 2 years of death
-Variation deed should be signed by all beneficiaries
-Variator( the person changing the will) should do it cost free

● Quick succession relief:

-QSR applies where an individual dies and within the previous 5 years they
–inherited an asset on someone's death and IHT was charged on it OR
–Received a lifetime gift and IHT was charged on the gift
-IHT on first death x Appropriate %
- IHT on first death= total IHT paid on first death/Gross chargeable estate value on
first death x Value of asset gifted out of the first estate.
-Finally
IHT on chargeable estate (current) xxx
L: QSR (xx)
L: DTR (xx)
UK inheritance tax payable xxx

● Quoted ex div and ex interest

-We take cum interest/ cum dividend while valuing securities and shares which are to
be included in death estate
-Securities= Value using lower of rule+ next interest payment less 20% tax
-Shares= Value using lower of rule + next dividend payment
● Payment of IHT:
-CLT’s between 6 April and 30 September(Lifetime)= 30 April after the fiscal year
-CLT’s between 1 October and 5 April(Lifetime) = 6 months after the end of the
month in which the transfer is made
-PET’s chargeable as result of death=6 months after the end of the month of death
-CLT’s death tax=6 months after the end of the month of death
-Estate at death=Earlier of
1)6 months after the end of the month of death
2)On delivery of estate accounts to HMRC
Interest runs from 6 months after the end of the month of death

OVERSEAS IHT

● If a person is UK domiciled then he has to pay UK IHT on worldwide assets

● If a person is non UK domiciled then he has to pay UK IHT on UK assets

How is Actual domicile gained?

● By birth
● By dependency: Through parents
● By choice: immigration
Deemed domicile-
● A person will be considered as a deemed domicile for 3 years after he leaves
his actual UK domicile
● A person who has been a resident in UK for 15 out of last 20 years will be
assumed to have UK domicile

● DTR(Double Tax Relief)

● If double tax is charged then DTR will be given at lower of:
1)UK tax on that assets
2)Overseas tax on that assets
Only available to UK domicile

● Transaction cost on overseas asset:

● If transaction cost is incurred on disposing overseas asset then the expense will be at
lower off:
1)Actual expense
2)5% of value of asset

● Exempt residue:
1) Applied when mentioned that remaining/residue of estate left to an exempt
person.
2) First we calculate (Net chargeable estate -NRB available) x 40/60
3) Then we add this IHT to net chargeable estate and add the exempt party
estate portion and then the balancing figure of Total estate minus both these
figures will be the reduced estate value for spouse/ civil partner.