IHT twice?

[Joe Bloogs]

Q. A makes a cash gift to B, (well in excess of Nil rate band). B dies within 7 years. Some time later, (still within first 7 years), A also dies.

Is Inheritance Tax levied twice on the same asset in the above case, i.e. IHT first on B and then IHT on A because his initial gift to B still counted as part of his estate?

[Huw Williams]

Yes.

The calculations can be a little more complicated though. The gift by A was potentially exempt when made, but because he did not survive the 7 years it became taxable. However there may be some relief from the full 40% depending on how long before death the gift was made (this is something called taper relief which is not to be confused with the CGT relief of the same name).

Possibly the bigger effect is on the tax on A's death as it will ALL be at 40% because the nil rate band is used up by the gift to B.


Huw Williams
217 Musters Road
West Bridgford
Nottingham
NG2 7DT

0115 914 6846

enquiries@huwwilliams.co.uk

[Lambs]

I may well be wrong, but I think that if there is less than a 5 year interval between A's transfer to B, and B's death, then "Quick Succession Relief" will also apply, to the IHT charged on B's estate, even 'though one normally thinks of QSR as applying when B dies quickly after inheriting something from A, on A's death.

QSR acts to reduce the attributable IHT charge, by 100% if the first transfer occurs within a year of B's death, down to by 20% if within 5 years of death.

I'd be interested to see if anyone agrees with this!

[Arnold Aaro]

Yes - the latter is applicable.

If an individual leaves an estate that is chargeable to IHT, this could benefit to QSR if the deceased received an inheritance from another chargeable estate within 5 years prior to death.

Relief between 100% and 20% depending on period between transfer and death.

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail: arnold.aaron@zurichadvice.co.uk
Tel: (office) 0208 437 2500 (m) 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments in general]

[McLeod of S. Wales]

OK folks here's another one. Mum A who owns property totalling £350k gives Son B a house worth £250k. A week later son B gives Mum A a house worth £200k. Revenue treats the two gifts as an exchange for tax purposes and charge stamp duty accordingly but they are still two gifts. Mum A only survives three years. For IHT does the revenue tax the estate as being £350k or £550k?!!

[Huw Williams]

In these circumstances, the value of the gift may only the difference - ie £50k, so that she is only taxed on her estate on death (£300k) as adjusted for gifts within 7 years of death (£50k).


Huw Williams
217 Musters Road
West Bridgford
Nottingham
NG2 7DT

0115 914 6846

enquiries@huwwilliams.co.u