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Inheritance Tax is paid on an estate when somebody dies or when trusts or gifts are made during someone's lifetime.
Inheritance Tax is only due if the estate in question, including any assets held in trust and gifts made within seven years of death, is valued over the Inheritance Tax threshold (currently £325,000); the tax is payable at 40% on the amount over this threshold. Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate to £650,000 if the first person to die leaves their entire estate to their partner.
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Secondary tax liabilities—table This table summarises the provisions under which a company may be liable for taxes that are primarily the responsibility of another person, in the context of a company takeover. It is designed to be read in conjunction with the more detailed explanation of each of the provisions in Practice Note: Secondary tax liabilities of companies. Description Legislation Who is secondarily liable? When does liability arise? Time limit for assessing secondary liability Statutory Indemnity Change in ownership rules CTA 2010, ss 710–719 Person in control of the company undergoing change in ownershipCompanies within control of that person Six months after assessment of primary liability—CTA 2010, ss 710(1)(b), 713(1)(c) Three years—CTA 2010, ss 710(4), 713(4) Yes—CTA 2010, s 717(2) Group payment arrangements TMA 1970, s 59F Nominated company agrees to pay tax on behalf of other members Not strictly secondary liability—liability is based on contract N/A N/A Chargeable gains—shareholders’ liability for company’s chargeable gains TCGA 1992, s 189 Connected shareholders receiving capital distribution Six months after due date...
Time limits for filing returns and paying tax—table FORTHCOMING CHANGE related to Making Tax Digital: As part of the government’s wider Making Tax Digital (MTD) programme: • subject to limited exceptions and deferrals, sole traders and landlords will be required to submit quarterly digital updates to HMRC about their income and outgoings and returns in digital compatible formats with effect from April 2026, April 2027 or April 2028 for those with income in excess of £50,000, £30,000 or £20,000 respectively, and • the previous government consulted from 12 November 2020 to 5 March 2021 on the design for extending MTD to corporation tax on a voluntary basis from 2024 and a mandatory basis not before 2026, for more detail see News Analysis: Further provisions for draft Finance Bill 2021—Tax analysis—Business and enterprise The 2020 10 year roadmap for digitalising tax administration is explained in more detail in News Analysis: Making tax digital—getting on the virtual road. MTD for VAT has applied to all VAT-registered businesses, regardless of...
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UK residential property ownership structures for UK resident and domiciled individuals—taxation flowchart This flowchart illustrates the main taxes applicable to different UK residential property
Excluded property from 6 April 2017—flowcharts These flowcharts are designed to help determine if an asset is excluded property for the purposes of UK inheritance tax (IHT) on or after 6 April 2017. The flowcharts consider whether an asset is excluded property or not, depending on the situs of the property and the domicile of the beneficial owner or settlor as appropriate. However, the detailed provisions relating to excluded property should be referred to and practitioners should also consider whether a double tax treaty may apply to override the excluded property regime depending on the particular circumstances of a matter. See Practice Note: Double taxation relief—summary. Conversely, unilateral relief from IHT may apply where a tax of a similar nature has already been levied in respect of the same asset by a foreign tax authority. For further information, see Practice Notes: Excluded property trusts—key events affecting IHT status and Situs of assets for succession and IHT. Situs of property The situs of an asset is important for determining the...
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The calculation and apportionment of inheritance tax (IHT) due on death can be complex, especially taking account of trust interests, chargeable lifetime transfers, the potential mix of exempt and non-exempt beneficiaries, available reliefs, the basic nil rate band (NRB) and the residence nil rate band (RNRB). For further information on calculating IHT on death, see Practice Note: Calculating the inheritance tax (IHT) charge on death, which also contains links to further resources.While HMRC is concerned only with ascertaining and collecting the correct total amount of IHT (and interest) payable following an individual’s death, the beneficiaries of the individual’s estate will want to be sure that the IHT burden has been correctly allocated and that their legacy has benefited from all relevant reliefs and exemptions in the correct proportions. The correct allocation of IHT is the responsibility of the personal representatives (PRs).Calculating the estate rate of IHTOnce the total IHT on the estate is calculated, it is usually necessary to work out how much IHT is attributable to each legacy and...
This Practice Note outlines how to calculate the amount of inheritance tax (IHT) that arises on an individual’s estate on death. For a broader explanation of the IHT charge on death, see Practice Note: IHT—the charge on death. For a worked example of an IHT calculation on death, see Practice Note: Case study—IHT calculation on death.IHT charge on deathThe IHT charge on an individual’s death falls under two headings:•the 'additional charge'—which can arise on chargeable lifetime transfers (CLTs) and potentially exempt transfers (PET) made by the deceased in the seven years before death, and•the 'estate charge'—which arises on the value of all the property the deceased owned (or was deemed to own) immediately before deathAdditional charge on deathAdditional IHT may be due on the death of the transferor on CLTs that have already suffered IHT at the lower lifetime rates.Where the deceased has not survived seven years from the date of a PET, the failed PET is treated as a chargeable transfer and IHT arises for the first time.The IHT...
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Price and service notice—hourly rate—general—law firms 1 Legal costs 1.1 There are [two OR three] main elements to the legal costs of [insert brief description of services, eg obtaining a grant of probate and distributing an estate]: 1.1.1 our charges; 1.1.2 expenses we must pay out of your behalf (sometimes called disbursements)[; OR .] 1.1.3 [costs that you may have to pay another party.] 1.2 Our charges 1.2.1 Our hourly rate[s] for [insert brief description of services] [is OR are] £[insert single hourly rate or list the rates for different fee earners]. 1.2.2 On average, this type of works takes [insert range of hours] hours to complete. This means that on average our charges will be £[insert cost range]. 1.2.3 The exact number of hours it will take depends on the circumstances of your case, such as: (a) [insert first factor, eg there is a valid will]; (b) [insert next factor]; (c) [insert next factor]; 1.2.4 If [insert description of low complexity matter, eg there...
Residential conveyancing—conveyancer’s letter of advice to buyers on co-ownership [insert names and address of clients] Date [insert date] Dear [insert names of clients] Re: Proposed purchase of [insert address of property] As you are purchasing the above property together, it is necessary for you to decide whether you are going to hold the property as: • joint tenants, or • tenants in common This is an important distinction because it governs how your respective interests in the property will be treated. Joint tenants If you hold the property as joint tenants, you will both own the whole of the property rather than a specific share of the property. If the property is sold while you hold it as joint tenants, the sale proceeds will be shared between you equally. The most important effect of holding the property as joint tenants is that you cannot leave an interest held as a joint tenant to anyone in your will. If you die, your interest in the property does not form part of...
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Where a co-owner of property dies, what level of discount can be claimed on the value of a deceased co-owner's interest for IHT purposes and how is it claimed? Guidance on valuing interests in land on the death of a co-owner can be found in Practice Note: IHT—valuation principles and particular types of property, in particular sections: Valuing land, buildings and interests in land and Valuing joint property. The level of discount available is a matter for negotiation with the Valuation Office Agency of HMRC, but it is common for a discount of 10–15% to be claimed for jointly owned real property. The estimated value of the deceased's interest in the property should be included in the IHT400 and Schedules IHT404 and IHT405:
Is it correct that any residence nil rate band (RNRB) should not be affected if the cohabitant rights are deemed to be a contractual licence to occupy but may be affected if they have an equitable interest in the property? Would the position be different if the cohabitees were co-owners of the property (ie the cohabitation agreement gave them each rights of occupation over the other's share for a period after the death of the first of them to die)? We refer you to Q&A: Could rights of occupation of a residence given to an unmarried partner under a cohabitation agreement affect the availability of residence nil rate band on the death of the grantor?, which discusses the difference between a mere contractual licence to occupy a property, and an equitable interest in that property. In order to qualify for the residence nil rate band (RNRB) to apply, the deceased must have had an a qualifying residential interest (QRI) in the relevant property, either by holding both the legal and...
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This week’s edition of Private Client highlights includes: (1) Tonkin v Revenue and Customs Commissioners, in which the FTT overturned an IHT charge in an employment income scheme; (2) analysis of Osmond and Allen v HMRC, a decision of the UT which held that the taxpayers did not have a main purpose of obtaining an income tax advantage; (3) the Office of Financial Sanctions Implementation publishes guidance on sanctions compliance threats for art market and high-value goods; (4) analysis of the new Pensions Schemes Bill; (5) analysis of Rogers v Wills, where a daughter was held to be entitled to substantial sums for caring for her late mother prior to death; (6) the Scottish government launches a consultation on the reform of the regulations concerning the dissolution of Scottish Charitable Incorporated Organisations; and (7) the Law Commission launches a consultation on reforms to private international law in the context of digital assets and electronic trade documents.
This week's edition of Share Incentives weekly highlights includes: (1) a reminder of the 6th July filing deadline for annual share schemes returns to HMRC, (2) the Private Intermittent Securities and Capital Exchange System (Exemption from Stamp Duties) Regulations 2025 coming into force and (3) the case of Tonkin v Revenue and Customs Commissioners [2025] UKFTT 750 (TC).
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