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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Carl died and his executors paid IHT late on a lifetime transfer that became chargeable to additional tax due to his death. The tax was paid after the due date. Which statement on interest is correct using the ATX-UK tax tables?

Interest on late-paid IHT is charged at the rate on underpaid tax, 8.50% in the ATX-UK tables, from the due date to payment. The 3.75% official rate and the 3.50% overpaid rate do not apply to underpaid tax.

  1. AInterest on underpaid tax runs at 8.50% from the due date until paymentCorrect
  2. BInterest on underpaid tax runs at the official rate of 3.75%
  3. CInterest on underpaid tax runs at 3.50%
  4. DNo interest is charged on inheritance tax

Explanation

Late-paid IHT carries interest on underpaid tax, which is 8.50% in the tax tables, running from the due date until payment. The 3.75% rate is the official rate for beneficial loans, and 3.50% applies to overpaid tax. IHT does bear interest.

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