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ACCA Applied Skills · Taxation (UK) · The liabilities arising on chargeable lifetime transfers and on the death of an individual

Neil made a chargeable lifetime transfer of £200,000 to a trust on 1 March 2019, and a further chargeable lifetime transfer of £180,000 to a different trust on 1 December 2025, both after exemptions. The trusts pay any tax. Only the transfers shown have been made. What is the lifetime inheritance tax on the December 2025 transfer?

The tax is £11,000. The March 2019 transfer falls within the seven years before the December 2025 transfer, leaving £125,000 of the nil rate band. The £55,000 excess of the £180,000 transfer is taxed at the 20% lifetime rate.

  1. A£11,000Correct
  2. B£0
  3. C£36,000
  4. D£7,000

Explanation

The 2019 transfer is within seven years before December 2025? It was made more than 6 years but less than 7 years before, so it is within the seven-year look-back and uses £200,000 of the nil rate band. Remaining band is £125,000. Excess is £180,000 - £125,000 = £55,000. Tax at 20% is £11,000.

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