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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the scope of inheritance tax

Elena is UK domiciled and owns shares in a UK company worth £200,000 and a holiday flat in Spain worth £300,000. She gifts the Spanish flat to her son, who is non-UK resident. Which statement about the scope of inheritance tax on this gift is correct?

The gift is within the scope of inheritance tax because Elena is UK domiciled, so her worldwide assets are chargeable. As a gift to an individual it is a PET, becoming chargeable only if she dies within seven years, regardless of the son's residence.

  1. AThe gift is outside inheritance tax because the flat is situated overseas
  2. BThe gift is within the scope of inheritance tax because Elena is UK domiciled, so her worldwide assets are chargeable, and it is a PETCorrect
  3. CThe gift is within inheritance tax only if the son is UK resident
  4. DThe gift is a chargeable lifetime transfer because the recipient is non-UK resident

Explanation

A UK domiciled individual is subject to inheritance tax on worldwide assets. The gift to an individual is a PET, so it only becomes chargeable if she dies within seven years. The recipient's residence does not change the PET status.

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