Your client, Eric, requires advice on the inheritance tax reliefs available in respect of assets in his estate at death.

Eric:
– Is UK resident and domiciled.
– Is a higher rate taxpayer.
– Is in ill health and is expected to die within the next few months.

Malaga plc shares:
– Malaga plc is a quoted trading company with 200,000 issued shares.
– 80% of Malaga plc’s chargeable assets have always been chargeable business assets.
– Eric was given 12,000 shares in Malaga plc by his sister on 1 April 2010, when they were valued at £126,000.
– Eric’s sister had purchased the shares for £96,000 on 1 March 2009.
– Gift relief was claimed in respect of the gift of the shares to Eric on 1 April 2010.
– Eric paid the inheritance tax arising in respect of this gift following his sister’s death on 1 September 2011.
– Eric has never worked for Malaga plc.
– Eric sold 6,000 shares in Malaga plc on 1 March 2015.

Assets owned by Eric and a previous lifetime gift:
– Eric owns farmland in the UK, which has been leased to a tenant farmer for the last ten years.
– The farmland has a market value of £420,000 and an agricultural value of £340,000.
– Eric’s other assets, excluding the remaining Malaga plc shares, are valued at £408,000.
– Eric has made only one previous lifetime gift, of £60,000 cash to his son Zak on 1 July 2009.

Required:
(ii) Explain, with the aid of calculations, the impact on the inheritance tax liability arising on Eric’s death if Eric does not die until 1 August 2016. (3 marks)