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

Which one of the following statements about the lifetime inheritance tax rate and the periods used in lifetime calculations is correct?

The correct statement is that the lifetime rate on the excess above the nil rate band is 20%. The 40% rate applies only on death, the residence nil rate band is not available on lifetime transfers, and taper relief reduces tax rather than value.

  1. AThe lifetime rate on a chargeable lifetime transfer above the nil rate band is 20%Correct
  2. BThe lifetime rate on a chargeable lifetime transfer above the nil rate band is 40%
  3. CThe residence nil rate band of £175,000 is deducted from chargeable lifetime transfers
  4. DTaper relief reduces the value of the transfer rather than the tax

Explanation

The tax tables give a lifetime rate of 20% on the excess over the £325,000 nil rate band, and a death rate of 40%. The residence nil rate band applies only on death, not to lifetime transfers. Taper relief reduces the tax payable on death, not the value transferred.

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