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ACCA Applied Skills · Taxation (UK) · The use of exemptions in deferring and minimising inheritance tax liabilities

Which of the following lifetime gifts is exempt from inheritance tax regardless of the amount, provided the donor and donee are UK domiciled?

A gift to a registered UK charity is wholly exempt from inheritance tax with no monetary limit. The other exemptions, such as marriage gifts, small gifts and the annual exemption, are each capped at a fixed amount.

  1. AA gift to a registered UK charityCorrect
  2. BA gift to a grandchild on marriage
  3. CA gift to a brother of £250 per year
  4. DA gift to a friend of £5,000

Explanation

Gifts to a UK registered charity are fully exempt with no upper limit. A gift on marriage to a grandchild is limited to £2,500. The small gifts exemption covers up to £250 per recipient per tax year but a brother is only one example, and this option is a limited-value exemption. A £5,000 gift to a friend is only partly covered by the annual exemption.

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