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

Which statement about taper relief on a lifetime transfer is correct?

Taper relief reduces the death tax on a gift only when death occurs more than three years after the transfer. It does not reduce the gift's value for cumulation, and it never produces a refund of lifetime inheritance tax already paid.

  1. AIt reduces the value of the transfer for the purposes of cumulation
  2. BIt applies to the tax only where the transfer was made more than three years before deathCorrect
  3. CIt is available for any gift made within seven years provided it exceeds the nil rate band
  4. DIt can be claimed to obtain a refund of lifetime tax paid at 20%

Explanation

Taper relief reduces the tax, not the value, and starts only when death is more than three years after the gift (20% for 3 to 4 years). It matters only where the transfer exceeds the available nil rate band. It never creates a repayment of lifetime tax already paid.

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