ACCA ATX ^UK Syllabus A3. Inheritance Tax - Principles of valuation - Past Papers ^{1 / 3}

Juanita has contacted you following the death of her husband, Don. As the executor of his estate, she is seeking advice regarding the inheritance tax liability arising as a result of his death on shares which he owned.

Don:
– Died on 1 July 2016.
– Had always been UK resident and domiciled.
– Was married to Juanita, and they have one daughter, Lexi.

Lifetime gifts:
– Don made only two lifetime gifts.
– On 9 May 2011, Don gifted his overseas villa to Lexi.
– The villa was valued at £355,000 on 9 May 2011, and at £370,000 on 1 July 2016.
– On 1 March 2013, on the advice of a financial adviser, Don gifted 3,500 of his shares in Estar Ltd to Lexi.
– Prior to receiving this advice, Don had been planning to leave these shares to Lexi on his death.
– Under the terms of Don’s will, Don’s cousin will inherit the remaining 3,500 shares in Estar Ltd owned by Don at his death.

Estar Ltd:
– Is an investment company; no business property relief is available on the transfer of its shares.
– Before the gift on 1 March 2013, Don owned 7,000 ordinary shares in Estar Ltd.
– The remaining 3,000 ordinary shares issued by Estar Ltd are held by Juanita.
– The shares were valued as follows:

Required:
(a) Advise Juanita of the reduction in the inheritance tax liability arising on Don’s death in respect of the shares in Estar Ltd as a result of Lexi having received her shares as a lifetime gift, rather than on Don’s death. (8 marks)

Pescara requires advice on the inheritance tax payable on death

Pescara and her parents:
– Pescara is a higher rate taxpayer who is resident, ordinarily resident and domiciled in the UK.
– Pescara’s father, Galvez, died on 1 June 2007.
– Pescara’s mother, Marina, died on 1 October 2013.
– Both Galvez and Marina were resident, ordinarily resident and domiciled in the UK.

Galvez – lifetime gifts and gifts on death:
– Galvez had not made any lifetime gifts.
– In his will, Galvez left cash of £80,000 to Pescara and a further £80,000 to Pescara’s brother.
– Galvez left the remainder of his estate to his wife, Marina.

Marina – lifetime gifts and gifts on death:
– On 1 February 2009, Marina gave Pescara 375,000 shares in Sepang plc.
– Marina had made no other lifetime gifts.

Marina – gift of 375,000 shares in Sepang plc to Pescara:
– 1 January 2006 – Marina purchased 375,000 shares for £420,000.
– 1 February 2009 – Marina gave all of the shares to Pescara.

The shares were quoted at £1·84–£1·96
The highest and lowest marked bargains were £1·80 and £1·92.
– The shares did not qualify for business property relief or capital gains tax gift relief.

Pescara’s actual and intended capital transactions in the tax year 2013/14:

Required:
(a) Calculate the inheritance tax payable in respect of Marina’s gift of the shares in Sepang plc, as a result of her death. (7 marks)