ACCA TX ^UK Syllabus D. Inheritance Tax - Payment of inheritance tax and the due date - Past Papers ^{1 / 1}

Adana died on 17 March 2016, and inheritance tax (IHT) of £566,000 is payable in respect of her chargeable estate.

Under the terms of her will, Adana left her entire estate to her children.

At the date of her death, Adana had the following debts and liabilities:

(1) An outstanding interest-only mortgage of £220,000.
(2) Income tax of £43,700 payable in respect of the tax year 2015–16.
(3) Legal fees of £4,600 incurred by Adana’s sister which Adana had verbally promised to pay.

Adana’s husband had died on 28 May 2006, and only 20% of his inheritance tax nil rate band was used on his death. The nil rate band for the tax year 2006–07 was £285,000.

On 22 April 2006, Adana had made a chargeable lifetime transfer of shares valued at £500,000 to a trust. 
Adana paid the lifetime IHT of £52,250 arising from this gift. If Adana had not made this gift, her chargeable estate at the time of her death would have been £650,000 higher than it otherwise was. This was because of the subsequent increase in the value of the gifted shares.

Who will be responsible for paying the IHT of £566,000 in respect of Adana’s chargeable estate, and what is the due date for the payment of this liability?

A The beneficiaries of Adana’s estate (her children) on 30 September 2016
B The beneficiaries of Adana’s estate (her children) on 17 September 2016
C The personal representatives of Adana’s estate on 30 September 2016
D The personal representatives of Adana’s estate on 17 September 2016

Benjamin died on 30 November 2014 leaving an estate valued at £890,000. Inheritance tax of £276,000 was paid in respect of the estate. Under the terms of his will, Benjamin left £260,000 to his wife, a specific legacy of £120,000 (free of tax) to his brother, and the residue of the estate to his grandchildren.

What is the amount of inheritance received by Benjamin’s grandchildren?

A. £614,000
B. £510,000
C. £354,000
D. £234,000

Chan died on 8 December 2014, having made a lifetime cash gift of £500,000 to a trust on 16 October 2013. Chan paid the inheritance tax arising from this gift.

Who will be responsible for paying the additional inheritance tax arising from the gift made to the trust as a result of Chan’s death, and when will this be due?

A. The trustees on 30 June 2015
B. The personal representatives of Chan’s estate on 8 June 2015
C. The personal representatives of Chan’s estate on 30 June 2015
D. The trustees on 8 June 2015

Afiya died on 29 November 2012. She had made the following gifts during her lifetime:

(1) On 13 April 2011, Afiya made a cash gift of £32,000 to her husband.

(2) On 2 May 2011, Afiya made cash gifts to her three nieces. The first niece was given £100, the second niece was given £200, and the third niece was given £400.

(3) On 14 September 2011, Afiya made a gift of 6,500 £1 ordinary shares in Cassava Ltd, an unquoted investment company, to her daughter.

Before the transfer Afiya owned 8,000 shares out of Cassava Ltd’s issued share capital of 10,000 £1 ordinary shares. On 14 September 2011, Cassava Ltd’s shares were worth £3 each for a holding of 15%, £7 each for a holding of 65%, and £8 each for a holding of 80%.

(4) On 27 January 2012, Afiya made a cash gift of £400,000 to a trust. Afiya paid the inheritance tax arising from this gift.

On 29 November 2012, Afiya’s estate was valued at £620,000. Under the terms of her will Afiya left £150,000 to her husband, a specific legacy of £40,000 to her sister, and the residue of the estate to her children.

The nil rate band for the tax year 2011–12 is £325,000.

Required:
(b) State the due dates of payment for the inheritance tax arising from the gift made to the trust on 27 January 2012.

Note: Your answer should cover both the lifetime inheritance tax paid and the additional tax payable as a result of Afiya’s death. (2 marks)

Afiya died on 29 November 2012. She had made the following gifts during her lifetime:

(1) On 13 April 2011, Afiya made a cash gift of £32,000 to her husband.

(2) On 2 May 2011, Afiya made cash gifts to her three nieces. The first niece was given £100, the second niece was given £200, and the third niece was given £400.

(3) On 14 September 2011, Afiya made a gift of 6,500 £1 ordinary shares in Cassava Ltd, an unquoted investment company, to her daughter.

Before the transfer Afiya owned 8,000 shares out of Cassava Ltd’s issued share capital of 10,000 £1 ordinary shares. On 14 September 2011, Cassava Ltd’s shares were worth £3 each for a holding of 15%, £7 each for a holding of 65%, and £8 each for a holding of 80%.

(4) On 27 January 2012, Afiya made a cash gift of £400,000 to a trust. Afiya paid the inheritance tax arising from this gift.

On 29 November 2012, Afiya’s estate was valued at £620,000. Under the terms of her will Afiya left £150,000 to her husband, a specific legacy of £40,000 to her sister, and the residue of the estate to her children.

The nil rate band for the tax year 2011–12 is £325,000.

Required:
(c) Calculate the amount of the inheritance which will be received by Afiya’s children. (1 mark)

On 23 August 2007, Pere Jones made a gift of a house valued at £420,000 to his son, Phil Jones. This was a wedding gift when Phil got married.

Pere Jones
Pere died on 20 March 2013 aged 76, at which time his estate was valued at £880,000. Under the terms of his will, Pere divided his estate equally between his wife and his son, Phil. Pere had not made any gifts during his lifetime except for the gift of the house to Phil.

Required:
(ii) State who will be responsible for paying the inheritance tax arising from Pere Jones’ gift of the house, and when this will be due. (2 marks)