ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death
Priya made a chargeable lifetime transfer of £425,000 to a trust, with Priya paying the tax. No earlier transfers in the previous seven years. Ignore exemptions. What is the lifetime IHT payable?
This item is unreliable.
- A£20,000Correct
- B£25,000
- C£85,000
- D£5,000
Explanation
Excess over nil rate band is £425,000 − £325,000 = £100,000. Tax at 20% where the donee pays is £20,000. Because Priya pays, the gift must be grossed up: net excess £100,000 × 20/80 = £25,000. The correct answer is therefore £25,000 and option 0 is the donee-pays figure.
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