Question 1a i
Your manager has had a meeting with Kantar. Kantar recently appointed your firm to be his tax advisers.
Extracts from the memorandum recording the matters discussed at the meeting and from an email from your manager are set out below.
Extract from the memorandum
Kantar was born on 1 May 1962. He is resident and domiciled in the UK.
Kantar has owned and operated his unincorporated business since 2001. In February 2014 Kantar disposed of some land. He used the proceeds to purchase equipment and vans on 1 May 2014 in order to expand his business.
Kantar's only other income consists of UK property business income of £5,000 per year.
| Capital transactions | |
|---|---|
| 1 November 2012 | Kantar inherited eight acres of land from his uncle. Kantar's uncle had purchased the land for £70,000 in 1996. At the time of the uncle's death, the land was worth £200,000. |
| 5 November 2012 | Kantar gave £400 to each of his three nephews. |
| 1 February 2014 | On this date, when the eight acres of land were worth £290,000, Kantar gave two acres, valued by an independent expert at £100,000, to his son. Capital gains tax gift relief was not available in respect of this gift. |
| 2 February 2014 | Kantar sold the remaining six acres of land at auction for £170,000. |
Kantar has not made any disposals for the purposes of capital gains tax other than those set out above.
Kantar has not made any transfers of value for the purposes of inheritance tax other than those set out above.
Extract from an email from your manager
Please prepare notes for use in a meeting with Kantar. The notes should address the following issues:
(a) Capital transactions
(i) Inheritance tax
The availability of the small gifts exemption in respect of Kantar's gifts to his nephews.
A calculation of the potentially exempt transfer on 1 February 2014 after deduction of any available exemptions.
Tax manager
Required: Prepare the meeting notes requested in the email from your manager. The following marks are available:
(a) Capital transactions.
(i) Inheritance tax. (4 marks)