ExpertMedium2 marksMultiple Choice
ACCA · Question 09 · Inheritance tax
Section A
Helena owned 60% of the unquoted shares in 'Robo-Assist Ltd', a boutique robotics firm. She gifted a 15% holding to her daughter. Before the gift, her 60% holding was valued at £300,000. After the gift, her remaining 45% holding was valued at £180,000. The 15% holding itself is valued at £50,000 as a standalone minority interest.
What is the transfer of value for Inheritance Tax purposes before any exemptions?
Section A
Helena owned 60% of the unquoted shares in 'Robo-Assist Ltd', a boutique robotics firm. She gifted a 15% holding to her daughter. Before the gift, her 60% holding was valued at £300,000. After the gift, her remaining 45% holding was valued at £180,000. The 15% holding itself is valued at £50,000 as a standalone minority interest.
What is the transfer of value for Inheritance Tax purposes before any exemptions?
Answer options:
A.
£50,000
B.
£120,000
C.
£180,000
D.
£70,000
How to approach this question
Apply the diminution in value principle: subtract the value of the donor's estate immediately after the transfer from the value immediately before the transfer.
Full Answer
B.£120,000✓ Correct
Under IHT rules, the value of a lifetime transfer is measured by the 'diminution in value' of the donor's estate. Helena's estate was worth £300,000 before the gift and £180,000 after. The transfer of value is therefore £300,000 - £180,000 = £120,000. The standalone value of £50,000 is ignored.
Common mistakes
Using the market value of the gifted shares (£50,000) instead of the diminution in value.
Practice the full ACCA TX — Taxation Practice Exam 3
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