F4 Corporate and Business Law (ENG)FREE LSBF ACCA F4 FREE LSBF ACCA VIDEO LECTURES DOWNLOAD

A charge to inheritance tax (IHT) arises:
• on the death of an individual
• on lifetime gifts where the donor dies within 7 years of the date of a gift
• on some lifetime gifts which are taxed at the date of the gift.
The donor is the person who makes the transfer of the asset, and the
recipient is known as the donee.
Transfer of value
A transfer of value is a gift of any asset which results in a reduction in the
value of the donor’s estate.
To be treated as a transfer of value the transfer must be a 'gratuitous
disposition'. This basically means a gift.
A bad business deal will therefore not be liable to inheritance tax, even
though there is a fall in value of the estate, as it was not the donor's intention
to give anything away.
To calculate the transfer of value for IHT purposes, the loss to donor
principle is used (also referred to as the diminution in value concept).
The loss to the donor, is the difference between the value of the donor’s
estate before and after the gift, and is the starting point for IHT
calculations:
£
Value of estate before gift X
Less: Value of estate after gift (X)
—
Diminution in value or transfer of value X
The loss to the donor is usually the open market value of the asset gifted.
However, in some circumstances, the transfer of value from the donor’s
point of view is not necessarily the same as the value of the asset received
from the donee’s point of view.
This is most common with unquoted shares, where a controlling
shareholding has a higher value per share than a minority shareholding.

Chargeable property
All property to which a person is beneficially entitled is deemed to
form part of their estate. Therefore, a gift of any asset is a transfer of value.
For the purposes of the F6 examination there is no such thing as an exempt
asset for IHT purposes.
Chargeable persons
A chargeable person for the purposes of the F6 examination will always be
an individual.
Individuals
All individuals are potentially liable to IHT.
An individual who is domiciled in the UK is liable to inheritance tax on their
worldwide assets.
If not UK domiciled, they are liable on UK assets only.
However, for the purposes of the F6 examination, all individuals will be UK
domiciled.
Note that spouses and partners in a registered civil partnership are
chargeable to IHT separately.

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