Question 1

Section B - Case 2: Bramble Farms

Arthur owns Bramble Farms, a working agricultural estate. He decides to gift the entire estate to his daughter, Beatrice, during his lifetime. The estate includes agricultural land, a farmhouse occupied by Arthur, and various farm machinery.

Instead of gifting to Beatrice directly, suppose Arthur gifted the farm machinery into a discretionary trust. The value of the transfer (after all reliefs and exemptions) exceeds his nil rate band. Who is primarily liable to pay the lifetime IHT on this Chargeable Lifetime Transfer (CLT), and at what rate, assuming Arthur pays the tax?

Accepted Answer

Determine the tax rate for a CLT when the donor pays the tax. The nominal rate is 20%, but because the tax paid is also a loss to the estate, it must be grossed up (20/80 = 25%).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Applying the 20% rate without grossing up when the donor pays the tax.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 4

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