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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the basic principles of computing transfers of value

Aisha made a lifetime transfer of £500,000 to a discretionary trust on 1 June 2018 (chargeable lifetime transfer, no earlier transfers, nil rate band at the time assumed to be £325,000). She died on 15 March 2023. Using the taper relief table in the examinable rates, what percentage reduction applies to the death tax on this transfer?

The gap between the gift on 1 June 2018 and death on 15 March 2023 is just under five years, which is more than four but less than five. The taper relief table therefore reduces the death tax by 40%.

  1. A20%
  2. B40%
  3. C60%Correct
  4. D80%

Explanation

The period from 1 June 2018 to 15 March 2023 is more than 4 but less than 5 years, so the table gives a 40% reduction. Wait, check: 1 June 2018 to 1 June 2022 is 4 years, and 15 March 2023 is 4 years 9 months, so the reduction is 40%.

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