The Person Making A Transfer Is Known As The Donor: Inheritance Tax Part

inheritance taxThe Paper F6 syllabus requires a basic understanding of inheritance tax, and this twopart article covers those aspects that you should know.

As far as Paper F6 is concerned the terms ‘transfer’ and ‘gift’ can be taken to mean identical thing. While the person receiving the transfer is known as the donee, the person making a transfer is known as the donor. It is relevant to candidates taking Paper F6 in either June or December 2013, and is on the basis of tax legislation as it applies to the tax year 2012 13″.

If the donor dies within seven PET making years thence it becomes chargeable. The gift to Sophie’s daughter on 12 August 2010 is a PET for 610000 and is initially ignored. Essentially, the value of a PET is fixed at the time that the gift is made. Let me tell you something.

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Tax may be charged as pointed out by the rates and allowances applicable to the tax year in which the donor dies. Notice that it becomes chargeable because of Sophie dying within seven gift making years, and the transfer of 610000 could be charged to IHT depending on the rates and allowances for 201213.


inheritance tax Essentially a trust arises where a person transfers assets to people to hold for the benefit of other people, there’s no legal definition of what a trust is.

Parents may not need to make an outright gift of assets to their young children. An additional tax liability may consequently arise if the donor dies within seven gift making years. Therefore the additional tax liability is calculated using the rates and allowances applicable to the tax year in which the donor dies, just as for a PET, the value of a CLT is fixed at the time that the gift is made. Besides, a CLT is immediately charged to IHT on the basis of the rates and allowances applicable to the tax year in which the CLT is made, unlike a PET. Also, instead, assets can be put into a trust with the trust being controlled by trustees until the children are older.

The gift to the trust on 21 August 2010 is a CLT for 615000, and gonna be immediately charged to IHT on the basis of the rates and allowances for 2010 Lim has died within seven gift making years so an additional tax liability may arise depending on the rates and allowances for 2012 13″. The amount that can be claimed is depending on the proportion of the nil rate band not used when the first spouse died. Accordingly the amount that can be claimed on the death of the second spouse is calculated using the current limit of 325000, even when the first spouse may have died a couple of years ago when the nil rate band was much lower.

The gifts on 18 May 2012 and 20 March 2013 are both exempt as they do not exceed The gift on 5 October 2012 for 400 does not qualify for the small gifts exemption as So it’s more than It will instead be covered by Peter’s annual exemption for ‘2012 13’.

The gift on 25 October 2012 utilises the 3000 annual exemption for 201213″ and 1000. No lifetime IHT liability is payable as so it’s within the nil rate band for 2012 13″.

5000 may be exempt as a gift in consideration of marriage and William’s annual exemptions for 201213 and 2011 12″ are also available, the gift is a PET. 5000 may be exempt as a gift in consideration of marriage and William’s annual exemptions for 201213 and 2011 12″ are also available, the gift is a PET. Furthermore, the value of the PET is therefore 9000. The value of the PET is therefore 9000.

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