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

Tom made a chargeable lifetime transfer of £525,000 (after exemptions) to a trust in June 2018, paying the lifetime tax himself so the figure was already grossed up. No earlier transfers. He died in August 2024, 6 years and 2 months later. His death estate is £100,000. Using a nil rate band of £325,000, what additional death tax arises on the lifetime transfer, after taper relief?

No additional death tax arises on the transfer. Death tax of £80,000 is reduced by 80% taper relief to £16,000, which is lower than the £40,000 lifetime tax already paid, and there is no refund of the excess.

  1. A£8,000Correct
  2. B£40,000
  3. C£32,000
  4. D£0

Explanation

Death tax on the transfer: excess is £525,000 - £325,000 = £200,000 at 40% = £80,000. Taper relief for more than 6 but less than 7 years is 80%, so tax is £80,000 x 20% = £16,000. Less lifetime tax paid at 20% on £200,000 = £40,000, which exceeds £16,000, so no extra tax is due and there is no refund. The answer is £0 under that working.

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