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ACCA Applied Skills · Taxation (UK) · The basic principles of computing transfers of value

Sven gave shares in a quoted company to his friend on 1 October 2025. Before the gift Sven's estate was worth £500,000 including these shares; after the gift it was worth £300,000. Sven's annual exemptions for 2025/26 and 2024/25 are both unused. He had made no earlier transfers. What is the value of the potentially exempt transfer after the annual exemptions?

The potentially exempt transfer after exemptions is £194,000. The fall in Sven's estate is £200,000. Deducting the 2025/26 annual exemption of £3,000 and the unused £3,000 from 2024/25 leaves £194,000. Deducting only one exemption would give £197,000.

  1. A£194,000Correct
  2. B£200,000
  3. C£197,000
  4. D£206,000

Explanation

Transfer of value is the loss to the donor's estate: £500,000 less £300,000 = £200,000. The annual exemptions are then £3,000 for 2025/26 and £3,000 carried forward from 2024/25, total £6,000. £200,000 less £6,000 is £194,000. £197,000 deducts only one exemption; £200,000 ignores exemptions.

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