Question 1

Section B: Case 2 - Arthur Pendelton's Estate

Scenario: Arthur Pendelton died on 15 February 2024. He owned a working farm, 'Oakwood Farm', which he had actively farmed himself for the last 15 years. The farm consists of agricultural land, a farmhouse where Arthur lived, and two farm cottages occupied rent-free by his farm workers.

Question: Arthur's wife, Martha, died in 2010. At her death, the Nil Rate Band (NRB) was £325,000. She left £130,000 to their children and the rest of her estate to Arthur. What amount of NRB is available to Arthur's estate (excluding any Residence Nil Rate Band)?

Accepted Answer

Calculate the percentage of the NRB used by the first spouse on death. Martha used £130k / £325k = 40%. The unused percentage is 60%. Apply this unused percentage to the NRB in force at the date of the second spouse's death (£325,000). Add this to Arthur's own NRB.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Subtracting the absolute amount used (£130,000) from the current NRB, though in this case the NRB hasn't changed since 2010, so the math works out the same. However, the correct method is percentage-based.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 5

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