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Exempt assets
The following are exempt assets.
 Motor vehicles
 National Savings and Investments certificates and premium bonds
 Shares of Venture Capital Trust (VCT)
 Gilt-edged securities (treasury stock)
 Qualifying corporate bonds (QCBs)
 Certain chattels
 Investments held in Individual Savings Accounts
 Wasting chattels (an asset with an estimated remaining useful life of 50 years or less used for private
purpose, for eg. Plant and Machinery)
If an asset is an exempt asset any gain is not chargeable and any loss is not allowable.

Normal rates Residential property

Lower rate 10% 18%
Higher rate 20% 28%
Annual exempt amount £11,700
Entrepreneurs' relief
– Lifetime limit £10,000,000
– Rate of tax 10%

Question 1
Paul Opus disposed of the following assets during the tax year 2018/19(assume entrepreneur relief is not claimed
in any of the disposals):
(1) On 10 April 2018 Paul sold 5,000 £1 ordinary shares in Symphony Ltd, an unquoted trading company, for
£23,600. He had originally purchased 40,000 shares in the company on 23 June 2005 for £120,000 and
purchased a further 10,000 shares on 18 September 2008 for £44,000
(2) On 15 May 2018 Paul made a gift of 10,000 £1 ordinary shares in Concerto plc to his daughter. On that date
the shares were quoted on the Stock Exchange at £5.10–£5.18, with recorded bargains of £5.00, £5.15 and
£5.22. Paul had purchased 10,000 shares on 29 April 1994 for £14,000, and received a one for two bonus issue
on 31 January 2003. The shareholding is less than 1% of Concerto plc’s issued share capital, and Paul has never
been employed by Concerto plc.
(3) On 9 June 2018 Paul sold a vintage Aston Martin motor car for £76,400. The motor car had been purchased
on 21 January 2009 for £34,800.
(4) On 4 July 2018 Paul sold an antique vase for £9,350. The antique vase is one out of a pair of two vases
purchased earlier on 19 January 2006 for £6,200. Market value of the other remaining vase on the day of sale is
£7,650.
(5) On 16 August 2018 Paul sold three acres of freehold land for £285,000. He had originally purchased four
acres of land on 17 July 2005 for £220,000. The market value of the unsold acre of land on the day of disposal
was £90,000.
(6) On 21 September 2018, Paul sold his quarter share in a racing horse for £36,000, which was purchased two
years ago for £19,000.
(7) Paul sold a copyright for £75,000 on 5 October 2018, which he had purchased on 1st October 2008 for
£35,000. The copyright is due to expire on 30th September 2043.
(8) On 18th October 2018, Paul sold one chair for £8,400, from a set of three antique chairs. The set of chairs was
purchased 12 years ago for £9,000, and Paul had earlier sold one chair from the set for £5,500 in 2007. Market
values of other chairs were £15,500 in 2007 and Market value of remaining chair in 2018 is £9,600.
(9) Paul had purchased a 25 years lease on land for £18,000 in October 2008. He disposed of this piece of land
for the sum of £54,000 (gross) on 30th October 2018.
(Lease depreciation % 45 years = 98.059, 35 years = 91.981, 25 years = 81.100, 15 years = 61.617, 5 years =
26.722)
(10) On 5 March 2019 Paul sold a freehold holiday cottage for £125,000. The cottage had originally been
purchased on 28 July 2005 for £101,600 by Paul’s wife. She transferred the cottage to Paul on 16 November
2006 when it was valued at £114,800.
(11) 2,000 shares in APC Ltd were sold for £3,500 on 31 March 2019. Paul's purchases of APC Ltd shares have
been:
14 September 1993: 1,000 shares for £500
16 November 2000: 500 shares for £550
19 October 2003: 500 shares for £775
31 March 2019: 200 shares for £300
Paul had a capital loss of £8,500 bought forward as at 6 April 2018. Assuming Paul’s employment income for the
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tax year 2018/19is £80,000.

Calculate his capital gains tax for 2018/19.
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Land & Buildings
a) Disposal less than 20% of the total current value (before disposal) and
b) total disposal of land in the year is less than £20,000
Shares
a) Disposal less than 5% of the total value (before disposal) OR
b) total disposal of shares less than £3,000
Principal Private Residence - The ‘periods of occupation’ include:
 any period of actual occupation
 the last 18 months of ownership (always exempt, unconditionally)
 the following periods of deemed occupation:
 up to three years of absence for any reason
 any period spent employed abroad
 up to four years of absence while working elsewhere in the UK (employed or self-employed)or self-
employed abroad.
Note that:
 The periods of deemed occupation above must be preceded and followed by a period of actual occupation.
 The condition to reoccupy after the period of absence does not need to be satisfied for periods (ii) and (iii)
above where an employer requires the individual to work elsewhere immediately, thus making it impossible to
resume occupation.
Question 2 (Principal Private Residence)
On 30 September 2018 David and Angela sold a house for £381,900. The house had been purchased on 1
October 1992 for £86,000. David and Angela occupied the house as their main residence from the date of
purchase until 31 March 1996. The house was then unoccupied between 1 April 1996 and 31 December 1999
due to Angela being required by her employer to work elsewhere in the United Kingdom.
From 1 January 2000 until 31 December 2007, David and Angela again occupied the house as their main
residence. The house was then unoccupied until it was sold on 30 September 2018. Throughout the period 1
October 1992 to 31 September 2018 David and Angela did not have any other main residence.
Question 3(letting relief – business use)
Zeeshan sold a house for £235,000 on 31.12.18. He had purchased it on 1.5.04 at a sum of £95,000. He lived
there except for the period between 1.1.09 to 31.12.10, when the house was let out. From 1.5.05 to 31.12.08, one
room of the house (constituting 20% of the areas) was used for business purposes.
Calculate his capital gains.
Question 4
Ahmed sold the following assets during 2018/19:
a) A freehold warehouse for £205,000 on 31st May 2018. The warehouse was originally purchased by his father in
2001 for £90,000 and has been used in business since then. Ahmed acquired the warehouse on his father’s
death when the probate value was £165,000.
b) A painting for £9,500 on 15th July 2018. The painting was given to Ahmed by his Uncle as a birthday gift two
years ago, when it had a value of £7,500. His uncle had purchased the painting for £3,400 in 2003.
c) An office building for £220,000 in December 2018. The office building was given to Ahmed by his father as a
gift in January 2007 when it had a market value of £185,000. His father had purchased the office for £130,000 in
2005. It is to be considered as a business asset.
d) 20,000 shares of ABC plc, an unquoted company, for £6 each. The shares were transferred to him by his wife
in January 2019. His wife had received the shares as gift from her father in August last year, when they were
valued at £4.5 each. They were originally purchased in September 2005 for £3.2 each.
Calculate the net cash Ahmed will receive after paying all taxes, assuming all applicable relief’s are claimed
during these transactions. Ignore entrepreneur relief.
Question 5 (Restructuring)
Fahad had purchased 20,000 shares in Earth Limited in August 2012 at a cost of £5 per share. In December
2012, Jupiter Limited acquired Earth Limited and gave all of the Earth Limited shareholders 2 ordinary and 1
preference share of Jupiter Limited, against each of their original share in Earth Limited.
Jupiter Limited’s ordinary shares were valued at £5, while preference shares were valued at £4 on 22 December
2012. Fahad sold 10,000 ordinary shares of Jupiter Limited for £90,000 on 31st December 2018. Jupiter Limited’s
preference shares were valued at £5 on this date. Calculate Fahad's capital gains for the year:
1) if the companies are quoted? 2) if the companies are unquoted?
Question 6 (Restructuring)
Asim sold 5,000 ordinary shares in West Limited, an unquoted company, for £4.5 per share on 31st March 2019.
He had received 25,000 shares in East Limited, an unquoted company, from his Uncle in 2003 as a gift, when
they were valued at £3 per share. His Uncle had purchased the shares for £2 each in 1999.
In December 2008, West Limited acquired East Limited, and gave 1 ordinary share and 1 preference share
against each share of East Limited. West Limited’s ordinary share was trading at £3 and preference share at £2
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immediately after the acquisition.

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On 31st March 2019, West Limited’s preference share was trading at £2.5 per share.
Calculate capital gains for Asim for 2018/19 assuming all reliefs are claimed?
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Concepts to discuss
 Negligible value claim  Terminal Capital loss
 Transfers on death  CGT installment option
Question 7 (Incorporation)
On 31 January 2019, Javaid sold his business to a limited company for an agreed value of £1,100,000. He set up
the business in August 2004.
All of the assets were transferred to the company with the exception of the cash. The assets transferred were as
follows:
Date of Purchase Market value31 January 2019 Cost
£ £
Freehold premises August 2004 700,000 240,000
Goodwill – 250,000 –
Inventory & receivables – 150,000 –
1,100,000
(a) Calculate the gain immediately chargeable and the base cost of these shares assuming Javaid received:
(i) 100,000 £1 ordinary shares in the company. (ii) 80,000 £1 ordinary shares plus £220,000 in cash.
(b) State the tax planning advice you would give to Javaid.
Question 8 (Roll over relief)
Babar purchased a free hold factory building costing £225,000 in 1995. He sold the factory building on
15.6.18 for £525,000 and purchased a freehold warehouse in the vicinity for a sum of £475,000 on
1.12.19. Both buildings are used in business and Babar claims all reliefs available to him. Calculate his capital
gains for 2018/19.
Question 9
Ahmed sold a free hold factory building for £325,000 on 12.5.18. He had purchased the building on 15.1.06 at a
cost of £120,000, after selling a freehold warehouse on 7.3.05 for 145,000. The amount of gains arising on sale
of warehouse was £70,000. Both buildings are used in business and Ahmed claims all reliefs available to him.
Calculate his capital gains for 2018/19.
Question 10 (holdover relief)
Ahmed sold an item of plant and machinery for £325,000 on 12.5.18. He had purchased the plant on 15.1.08 at a
cost of £225,000, after selling a freehold warehouse on 7.3.07 for 195,000. The amount of gains arising on sale
of warehouse was £65,000. Both assets are used in business and Ahmed claims all reliefs available to him.
Calculate his capital gains for 2018/19.
Question 11 (Entrepreneur relief)
Mr White is a sole trader and disposed of three chargeable assets during 2018/19 and realised the following
gains and loss:
A1 – The disposal of all chargeable assets used in his sole trader business making a capital gain of £260,000, he
has owned the business for 3 years.
A2 – The disposal of a chargeable asset not used in the business which realised a capital loss of £10,000.
A3 – The disposal of a 30% shareholding in Green Ltd an unquoted trading company making a capital gain of
£40,000, he has owned the shares for 2 years. Mr White is an employee of Green Ltd and he receives a salary of
£35,000 each year.
(a) Compute the capital gains tax payable in 2018/19 assuming that Mr White claims entrepreneurs’ relief for all
qualifying disposals.
(b) Evaluate how much of Mr White’s entrepreneurs’ relief is available to carry forward to 2019/20 assuming
maximum entrepreneurs’ relief was claimed in 2018/19 and state the due date for making the necessary election.
(c) What effect would it have made to Mr White’s CGT liability in 2018/19 if he had owned asset 3 for less than
one year? Your answer should include an evaluation of the potential increase or decrease in his total tax liability.
Question 12
On 30 September 2018 Mika sold a business that she had run as a sole trader since 1 January 2005. The sale
resulted in the following chargeable gains:
Goodwill £260,000
Freehold office building £370,000
Freehold warehouse £170,000
£800,000
The assets were all owned for more than one year prior to the date of disposal. The warehouse had never been
used by Mika for business purposes.
Mika has taxable income of £4,000 for the tax year 2018/19. She has unused capital losses of £28,000 brought
forward from the tax year 2017/18.
Mika’s capital gains tax liability will be?
Question 13
On 25 January 2019 Michael sold a 30% shareholding in Green Ltd, an unquoted trading company. The disposal
resulted in a chargeable gain of £800,000. Michael had owned the shares since 1 March 2005, and was an
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employee of the company from that date until the date of disposal. Michael has already used entrepreneur limit of
£9,300,000 in previous years. He has taxable income of £8,000 for the tax year 2018/19.
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Michael CGT liability would be?

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Question 14 (Exam style Question - Extract)
Ginger has a holding of 10,000 £1 ordinary shares in Nutmeg Ltd, an unquoted trading company, which she had
purchased on 13 February 2004 for £2·40 per share. The current market value of the shares is £6·40 per share,
but Ginger intends to sell some of the holding to her daughter at £4·00 per share during March 2019. Ginger and
her daughter will elect to hold over any gain as a gift of a business asset.
For the tax year 2018/19, Ginger will not make any other disposals, and has therefore not utilised her annual
exempt amount.
Required:
Explain how many £1 ordinary shares in Nutmeg Ltd Ginger can sell to her daughter for £4·00 per share during
March 2019 without incurring any capital gains tax liability for the tax year 2018/19.
Question 15 (Exam style Question - Extract)
You should assume that today’s date is 15 December 2019.
Patrick and Emily Grant are a married couple. For the tax year 19/20, Patrick will have taxable income of £7,200,
and Emily will have taxable income of £46,400. During May 2019, Emily disposed of an investment, and the
resultant chargeable gain fully utilised her annual exempt amount for the tax year 19/20.
Patrick and Emily urgently need to raise £80,000 in order to renovate their overseas property, and have three
alternative assets which can be sold. They would like to sell the asset which will provide them with the highest net
of tax proceeds. The three alternatives are as follows:
Alternative 1 – Land
Patrick owns eight acres of land, and a neighbouring farmer has offered to buy this land for £92,000. Patrick
originally purchased 14 acres of land on 2 May 2001 for £108,600 and he sold six acres of the land on 27
September 2006 for £37,800. The market value of the unsold eight acres of land was £52,700. The land has
never been used for business purposes.
Alternative 2 – Unquoted shares
Emily owns 8,000 £1 ordinary shares in Shore Ltd, an unquoted trading company with a share capital of 100,000
£1 ordinary shares. Shore Ltd’s shares have recently been selling for £13·00 per share, but Emily will have to sell
at £11·50 per share given that she needs a quick sale. The sale will be to an unconnected person. Emily
subscribed for her shares in Shore Ltd at par on 1 June 2005, and she has been a director of the company since
that date.
Alternative 3 – Quoted shares
Patrick and Emily jointly own 32,000 £1 ordinary shares in Beach plc, a quoted trading company. The shares are
currently quoted on the Stock Exchange at £2·88. Patrick and Emily originally purchased 54,000 shares in Beach
plc on 23 May 2003 for £75,600, but they had sold 22,000 shares on 17 November 2011 for £44,440. The
shareholding is less than 1% of Beach plc’s issued share capital, and neither Patrick nor Emily has been an
employee or a director of the company.
Required:
Assuming that the disposal is made in January 2019, advise Patrick and Emily Grant as to which of the three
alternative disposals will result in highest net proceeds after taking account of CGT.

Question 16 (Exam style Question - Extract)

Innocent and Nigel, a married couple, both have shareholdings in Cinnamon Ltd, an unquoted trading company
with a share capital of 100,000 £1 ordinary shares. Innocent has been the managing director of Cinnamon Ltd
since the company’s incorporation on 1 July 2004, and she currently holds 20,000 shares (with matching voting
rights) in the company. These shares were subscribed for on 1 July 2004 at their par value.
Nigel has never been an employee or a director of Cinnamon Ltd, and he currently holds 3,000 shares (with
matching voting rights) in the company. These shares were purchased on 23 April 2008 for £46,200. Either
Innocent or Nigel will sell 2,000 of their shares in Cinnamon Ltd during March 2019 for £65,000, but are not sure
which of them should make the disposal. For the tax year 2018/19, both Innocent and Nigel have already made
disposals which will fully utilise their annual exempt amounts, and they will each have taxable income of £80,000.
Required:
Calculate the capital gains tax saving if the disposal of 2,000 shares in Cinnamon Ltd during March 2019
is made by Innocent rather than Nigel.
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Inheritance Tax
Question 17
Ahmed died on 15.01.19. At the date of death, he owned:
_ Free hold property (office building – let out) valued at £100,000
_ Lease hold property (residential property) valued at £40,000, with an outstanding mortgage of £15,000
_ 10,000 shares in a quoted company. Closing price for 15.01.19 was 194-198 pence per share with bargains
during the day of 193, 195 and 199
_ A motor car purchased on 1.1.05 for £12,000 and valued at £7,500 at the time of death
_ A loan of £15,000 due to him by his brother
_ Bank deposit of £25,000

Ahmed owed £1,000 on his credit card, and £1,500 of gambling debts. His funeral expense amounts to £2,500.
Ahmed left free hold and leasehold properties to his son, while the remaining assets are to be given to his wife.

During his life Ahmed had given the following life time gifts.
_ £200,000 cash to a trust on 1.5.14 (trust will pay any IHT arising on the gift, if any)
_ Free hold property valued at £280,000 on 1.12.16 to his son
_ £120,000 cash to daughter on 1.3.17
Calculate IHT payable.
IHT Rates: Taper Relief
Nil rate Band £325,000 3 to 4 years = 20%
Residential Nil rate Band £125,000 4 to 5 years = 40%
Rate of Tax on excess - Death rate = 40% 5 to 6 years = 60%
- Lifetime rate = 20% 6 to 7 years = 80%
Question 18 (Related person valuation)
Hamid owns 30,000 shares in ABC plc (an unquoted company). His wife owns 25,000 shares, while his son owns
15,000 shares in the same company. The capital of ABC plc consists of 100,000 shares. The company is
engaged in investment business. On 15.1.13 Hamid gave 10,000 shares to his son.
Hamid died on 21.10.18, leaving the rest of 20,000 shares in ABC plc to his son, and an estate of £150,000 to his
wife.
The shares are valued as:
(on 15.1.13) (on 21.10.18)
less than 30% holding £15 per share less than 30% holding £18 per share
30-50% holding £20 per share 30-50% holding £22 per share
above £25 per share above £30 per share
Calculate IHT payable.

a) Property consisting of business = 100% BPR

b) Shares in unquoted company, including shares on AIM = 100% BPR
c) Shares in quoted company (majority shareholding) = 50% BPR
d) Land, building, plant & machinery owned by individual, used in business = 50% BPR
e) Agricultural property (on agricultural value) = 100% APR

Question 19
Ja died on 18 March 2019 leaving an estate valued at £450,000. She had made the following lifetime gifts:
 1 August 2010 A gift of £200,000 to a trust.
 1 November 2016 A gift of £280,000 to a trust.
These figures are after deducting available exemptions. In each case the trust paid any IHT arising from the gift.
The nil rate band for the tax year 2010–11 and 2016–17 is £325,000. IHT liabilities would be?

Question 20
Ja died on 18 March 2019 leaving an estate valued at £450,000. She had made the following lifetime gifts:
 1 August 2010 A gift of £200,000 to a trust.
 1 November 2016 A gift of £280,000 to her son.
These figures are after deducting available exemptions. In each case the trust paid any IHT arising from the gift.
The nil rate band for the tax year 2010–11 and 2016–17 is £325,000.IHT liabilities would be?

Question 21
Faisal owns 35,000 shares in XYZ plc (an unquoted company) since 1995. His wife owns further 25,000 shares
of the same company. The capital of the company consists of 100,000 shares. The company has 30% non-
business assets.
On 15.7.12, Faisal gave 20,000 shares to his son.(less than 25% holding is valued at £12 per share, 25-50%
is valued at £15 per share, while more than 51% holding is valued at £20 per share).
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On 13.2.13, he gave £90,000 into a discretionary trust.

On 21.9.14, he gave the rest of his shares to his daughter.(less than 25% holding is valued at £15 per share,
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25-50% is valued at £18 per share, while more than 51% holding is valued at £25 per share).
He died on 18.5.18, leaving an estate of £150,000 to his son. Calculate IHT
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Question 22
Zahid died on 21.10.18.
He owned the following assets at time of his death:
 A cottage (main residence) valued at £160,000
 20,000 Shares in ABC plc (quoted company) with closing price of 190-198 pence per share, and bargains of
the day of 194, 198, 202 and 196 pence.
 Bank deposit of £35,000

He had given the following gifts during his life:

 An apartment valued at £110,000 to his son on 12.10.11
 Cash of £150,000 to his son, as a wedding gift, for purchasing a yatch on 18.12.11. His son had sold the yatch
for £140,000 on 1.09.2018 when he moved to America.
 A painting valued at £25,000 to his daughter on 1.11.14. The painting was bought as a set in 1999, and Zahid
had given one of them to his wife at her birthday in 2002. Market value of the painting in possession of his wife
is £35,000, while the set can be sold at £75,000.
 Cash of £50,000 into a discretionary trust on 1.06.14.
 100,000 Shares in XYZ plc (unquoted company) into a discretionary trust on 1.05.15. The company is in
agricultural business with an asset base of £750,000. The company owns farmland with commercial value of
£500,000, while its agricultural value stands at £350,000.
Other assets include machinery valued at £100,000 used to pack agricultural products, and a building valued at
£150,000 let out to another company. The shares are valued at £15 each.
Zahid's shareholding in the company is less than 1%, purchased in 2002.
Calculate IHT.

Quick succession relief

Years between two death Appropriate %
0–1 100%
1–2 80%
2–3 60%
3–4 40%
4–5 20%

Question 23
Oscar died on 29 September 2018 leaving an estate valued at £385,000 to his son. Oscar had received £28,000
gross in July 2014 from his uncle's estate. IHT of £4,200 had been payable by Oscar on this legacy.
Calculate the IHT payable on Oscar's estate, assuming he has made no lifetime transfers.

Question 24(Specific gifts and exempt residue- Grossing up gifts on death)

Rory dies on 29 May 2018 leaving an estate valued at £490,000. Included in this is a house (which was let out) in
Manchester valued at £400,000 which he leaves to his son, Ian. He leaves the residue of the estate to his wife,
Sonya.
Calculate the IHT liability arising on death assuming Rory has made no lifetime transfers.

Question 25 (reduced rate for IHT)

Hazel died on 15 October 2018. Her estate included
Unquoted shares (owned for 2 years) £60,000
Main residence £520,000
Cash £220,000
In her will she left £55,000 to her favourite charity and the residue of estate was left equally to her three children.
Hazel’s husband had died several years ago and 30% of his nil rate band was unused.
Compute the inheritance tax payable by the executors.

Question 26
Margie died on 1 September 2018. The assets in her estate are valued at £380,000, and she had made a gross
chargeable transfer of £100,000 in 2012. In her will she left £20,000 to charity and the rest of her estate to a trust
for her children. Calculate the inheritance tax payable on her death estate.
Question 27 (The fall in value of lifetime gifts)
H transferred a house worth £335,000 to his son on 1 June 2015. H then gave £205,000 cash to his daughter on
20 August 2016. Shortly before H's death his son sold the house on the open market for £270,000. H died on 14
July 2018. Calculate the IHT liabilities arising.
Question 28 (Pre owned asset)
Jeremy gave his son £70,000 of cash in order to buy a house. His son purchased the house on 6 April 2018 and
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Jeremy occupied it rent free. The annual rental value of the house is £5,100.
Required
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Explain the income tax and inheritance tax implications of Jeremy giving the cash to his son.
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Assume that Jeremy has annual income from a partnership business of £160,000 each year.
Question 32 (Gift with reservation)
George died on 3 December 2018 leaving the following estate:
Assets in the UK £308,000
Foreign villa £99,000
Asset gifted to his grandson with a reservation attached £45,000
The executors incurred additional expenses of £5,500 in selling the foreign villa. In addition overseas death duties
of £9,500 have been paid.
In his will George left £12,000 to the Conservative Party, the foreign villa to his daughter and the residue of his
estate to his son. George had made no lifetime gifts.
Required
Calculate the IHT payable on George’s estate. State who is liable to pay the tax, who will suffer the tax, and the
due date of payment.
Altering deed of variation
Exam Question 01
Christopher, a widower, died suddenly on 5 February 2019, aged 77. His only child, Eleanor, is 44 years old and
recently married. Eleanor is the sole beneficiary of Christopher’s estate. Christopher’s wife had made lifetime gifts
that fully utilised her nil rate band.
During his lifetime, Christopher had made the following gifts:
9 August 2011: Gift of property worth £280,000 to a discretionary trust.
1 April 2014: Gift of £75,000 cash into the same discretionary trust.
15 November 2018: Gift of £80,000 cash to Eleanor on her marriage
On each occasion, Christopher paid any tax due on the gift.
The assets comprised in Christopher’s estate were as follows:
Notes Market value 5 February 2019
£
Residence 545,000
ISA account 11,050
Cash deposits 40,000
Shares in Penfold Limited (1) 85,000
Shares in Boise plc (2) see note
Notes:
(1) Penfold Limited is an unquoted UK trading company and the 5,000 shares, which had been owned by
Christopher for five years prior to his death; represent 5% of the company’s share capital. Penfold Ltd owns
investment properties that represent 7% of its total assets.
(2) Christopher held 15,000 ordinary £1 shares in Boise plc, a UK quoted company. This holding represents 2%
of the company’s issued share capital. At 5 February 2019, the cum dividend price per share was 700p – 708p,
with marked bargains at 701p, 702p and 707p.
Eleanor is wealthy in her own right, and pays income tax at the higher rate. She wishes to gift assets worth
£50,000 to her friend, Samantha, and has three options under consideration:
1) Three paintings valued in total at £50,000. Eleanor paid £25,000 for a set of four paintings in June 2000. She
sold one painting for £9,000 in January 2008. At that time, the remaining paintings were valued at £31,000.
2) Cash of £50,000 from the inheritance she is shortly to receive following the death of her father, Christopher.
3) 5,000 shares representing a 4% holding in Grange Limited, an unquoted UK trading company. These shares
were acquired by Eleanor for £17,500 in May 1998.
Eleanor has made no previous lifetime gifts for the purposes of inheritance tax (IHT).
Required:
(a) Calculate the inheritance tax (IHT) liability arising as a result of Christopher’s death. (11 marks)
(b) Explain the capital gains tax (CGT) and inheritance tax (IHT) implications of each of the three options being
considered by Eleanor.
Assume that any gift will be made in June 2019 and Eleanor will have already utilised her CGT annual exempt
amount for the tax year 2019/20 and that gift relief will not be claimed. (7 marks)
Payment of Inheritance Tax
Chargeable life time transfer
The donor is primarily responsible for any IHT that has to be paid in respect of a CLT.
The due date is the later of:
 30 April following the end of the tax year in which the gift is made (i.e, a CLT is made b/w 6 April t- 30 Sept).
 Six months from the end of the month in which the gift is made (i.e, a CLT is made b/w 1 October and 5 April).
The donee is always responsible for any additional IHT that becomes payable as a result of death of donor within
seven years of making a CLT. The due date is six months after the end of the month in which the donor died.
Potentially exempt transfers
The donee is always responsible for any additional IHT that becomes payable as a result of the death of donor
within seven years of making a PET. Due date is six months after the end of the month in which the donor died.
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Death estate
The personal representatives of the deceased’s estate are responsible for any IHT that is payable. The due date
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is six months after the end of the month in which death occurred.
ADVANCED TAXATION- Capital Taxes (CGT & IHT) FA _ 2018
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INHERITANCE TAX AND TRUSTS

CAPITAL GAINS TAX AND TRUSTS

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ADVANCED TAXATION- Capital Taxes (CGT & IHT) FA _ 2018
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Difference between IHT and CGT

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