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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Which of the following best describes a transfer of value for inheritance tax purposes?

A transfer of value is a disposal that reduces the value of the transferor's estate, and it is chargeable to inheritance tax unless an exemption applies. It is measured by the loss to the donor's estate, not by any capital gain or by death alone.

  1. AA disposal that reduces the value of the transferor's estate, other than one that is exemptCorrect
  2. BAny gift of an asset that gives rise to a capital gain for the donor
  3. CAny payment made by an individual to a charity or political party
  4. DA transfer of assets made only on the death of the owner

Explanation

A transfer of value is a gratuitous disposition that reduces the value of the transferor's estate; the measure is the loss to the donor's estate, not the gain. Exempt transfers are outside the charge. The capital gain option is wrong because IHT does not depend on a gain arising.

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