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ACCA Applied Skills · Taxation (UK) · The basic principles of computing transfers of value

Dana made a gift of £600,000 to a trust in May 2019, paying the lifetime tax herself, which is not covered by the nil rate band of £325,000 then assumed. She died in August 2025, 6 years and 3 months later. Assume the nil rate band is £325,000 throughout, and no other gifts. What additional tax is payable on death on this transfer, after taper relief, compared with the lifetime tax paid? Ignore grossing up and annual exemptions, and assume lifetime tax was calculated as 20% of the excess, with the trust paying.

No additional tax is payable. Death tax on the £275,000 excess is £110,000 at 40%, reduced by 80% taper relief to £22,000, which is less than the £55,000 lifetime tax already paid, and the excess is not refunded.

  1. A£14,000Correct
  2. B£27,000
  3. C£55,000
  4. D£0

Explanation

Excess is £275,000. Death tax at 40% = £110,000. Taper relief of 80% leaves £22,000. Lifetime tax paid at 20% = £55,000, which exceeds £22,000, so no additional tax is due, and no refund is given. Hence nil. The option £0 is correct and others ignore the credit.

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