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

Mr Lowe gave his 15% shareholding in an unquoted company to his son in lifetime. Mrs Lowe holds 40% of the company. Mr Lowe's shares have value £45,000 as a 15% holding. A 55% holding is valued at £660,000. Mr Lowe dies five years and six months after the gift, with the gift being a failed PET. He has made no other transfers and his nil rate band is £325,000 and the full band is available. Assume no reliefs or exemptions apply to the gift other than the annual exemptions (ignore those). What is the value of the transfer for IHT?

The value transferred is £180,000, calculated as 15/55 of the £660,000 value of the combined 55% related holding. Taper relief applies only to the tax charged on the failed PET, not to its value, so the five and a half years does not reduce the figure.

  1. A£45,000
  2. B£180,000Correct
  3. C£660,000
  4. D£15,000

Explanation

Related property: 15/55 x £660,000 = £180,000. Taper relief only reduces tax, not the value transferred, so the 5.5 years elapsed does not change £180,000. The £45,000 ignores related property, and £660,000 includes Mrs Lowe's shares.

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