Question 1

Section A

Mr. Vance owned 600 shares (a 60% holding) in a private unquoted company. The value of a 60% holding is £50 per share. He gifted 200 shares to his daughter. Following the gift, he retained 400 shares (a 40% holding). The value of a 40% holding is £20 per share. The value of a 20% holding (the gifted shares) as a standalone block is £15 per share.

What is the transfer of value for Inheritance Tax (IHT) purposes?

Accepted Answer

Apply the diminution in value principle: Value of the estate before the transfer MINUS Value of the estate after the transfer.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Valuing the gifted shares in isolation (£15 x 200 = £3,000) rather than looking at the loss to the donor.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 2

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