ACCA ATX ^UK Syllabus A3. Inheritance Tax - Fall in value of lifetime gifts - Past Papers ^{4 / 7}

Liber has requested advice on the timing of the sale of the shares which he acquired in a recent company takeover. His sister, Vesta, requires advice on the tax consequences of making a lifetime gift, rather than leaving an asset in her estate upon her death.

Vesta:
– Is 66 years old and has never married or had a civil partner.

– Is in ill-health and is expected to die at some time within the tax year 2019/20.

– Has made no disposals for capital gains tax purposes in the tax year 2018/19 to date and will not make any in the tax year 2019/20.

– Has made one previous lifetime gift, of £350,000 cash, to her son, Janus, on 1 June 2018.

Vesta – investment property:
– Vesta owns an investment property, which has never been used as her principal private residence.

– The current market value of the property is less than the price Vesta paid for it, and its value is expected to fall further throughout the tax year 2019/20.

– Vesta is considering gifting the investment property to Janus in her lifetime, rather than leaving it to him in her estate on death.

– Janus is the sole beneficiary of Vesta’s estate.

Required:
(b) Advise Vesta whether or not there are any capital gains tax or inheritance tax advantages, for herself, or for Janus, if she were to gift the investment property to Janus on 31 December 2018, rather than leaving it to him in her estate on death. (8 marks)

Your firm has been asked to provide advice in connection with inheritance tax and capital gains tax following the death of Cada.

Cada and her family:
– Cada, who was UK domiciled, died on 20 November 2014.

Cada – Lifetime gifts and available nil rate band:
– Cada had not made any lifetime gifts since 30 November 2010.
– Cada’s nil rate band available at the date of her death was £220,000.

Cada’s shareholdings at the time of her death:
– Quoted shares in JW plc valued at more than cost.
– Quoted shares in FR plc valued at less than cost.
– Unquoted shares in KZ Ltd valued at £nil.

Required:
(a) Explain the inheritance tax advantages, other than lifetime exemptions, which could have been obtained if Cada had made additional lifetime gifts of quoted shares between 1 December 2010 and her death. (4 marks)