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

Marcus gave shares to his son in July 2019 (a PET of £400,000) and died in October 2025. He made no other transfers and ignoring exemptions, his death estate uses no nil rate band. How is the PET treated, using the taper relief table?

The PET becomes chargeable because death occurred within seven years. The nil rate band covers £325,000, leaving £75,000 taxed at 40%, which is £30,000. Taper relief of 80% applies for death more than six but less than seven years after the gift, leaving £6,000.

  1. ADeath occurred more than 6 but less than 7 years after the gift, so tax is reduced by 80% but the nil rate band is used first against the PET, giving tax of £6,000Correct
  2. BThe PET is exempt because death was more than seven years after the gift
  3. CTax is £30,000 because taper relief reduces the tax by 60%
  4. DThe PET is fully chargeable at 40% on £400,000 with no relief

Explanation

The gap is more than 6 but less than 7 years (July 2019 to October 2025). The PET becomes chargeable. Nil rate band £325,000 covers part, leaving £75,000 taxed at 40% = £30,000. Taper relief at 80% reduces this to £6,000. Taper relief only reduces the tax, not the value.

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