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Cada

The document outlines the inheritance tax and capital gains tax implications following the death of Cada, who left behind an estate valued at £1,000,000. It discusses the potential tax advantages of making lifetime gifts, the impact of charitable donations on tax rates, and the benefits of varying the terms of her will. Additionally, it highlights the capital gains tax considerations related to Cada's shareholdings at the time of her death.

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smaraihan24
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14 views

Cada

The document outlines the inheritance tax and capital gains tax implications following the death of Cada, who left behind an estate valued at £1,000,000. It discusses the potential tax advantages of making lifetime gifts, the impact of charitable donations on tax rates, and the benefits of varying the terms of her will. Additionally, it highlights the capital gains tax considerations related to Cada's shareholdings at the time of her death.

Uploaded by

smaraihan24
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CADA (ADAPTED)

Your firm has been asked to provide advice in connection with inheritance tax and
capital gains tax following the death of Cada. The advice relates to the implications of
making lifetime gifts, making gifts to charity, varying the terms of a will and other
aspects of capital gains tax planning.

Cada and her family:


– Cada, who was UK domiciled, died on 20 November 2020.
– Cada is survived by two daughters: Raymer and Yang.
– Raymer has an adult son.
– Yang has no children.

Cada – Lifetime gifts and available nil rate band:


– Cada had not made any lifetime gifts since 30 November 2016.
– Cada’s nil rate band available at the date of her death was £220,000.

Cada’s death estate and the details of her will:


– Cada owned assets valued at £1,000,000 at the time of her death.
– Cada left her house, valued at £500,000, to Raymer.
– Cada left cash of £60,000 to a UK national charity.
– Cada left her remaining assets (including a portfolio of shares) valued at £440,000,
to Yang.
– None of the remaining assets qualified for any inheritance tax reliefs.

Raymer:
– Is not an accountant, but has some knowledge of the UK tax system.
– Has made four observations regarding her mother’s estate and her inheritance.

Raymer’s four observations:


– 'My mother should have made additional gifts in her lifetime.'
– 'The tax rate on the chargeable estate should be less than 40% due to the gift to
charity.'
– 'I do not intend to live in the house but will give it to my son on 1 July 2021.'
– 'My mother paid capital gains tax every year. However, when she died, some of her
shareholdings had a value of less than cost.'

Cada’s shareholdings at the time of her death:


– Quoted shares in JW plc. valued at more than cost.
– Quoted shares in FR plc. valued at less than cost.
– Unquoted shares in KZ Ltd valued at £nil.

Required:
(a) Explain the inheritance tax advantages, other than lifetime exemptions, which
could have been obtained if Cada had made additional lifetime gifts of quoted
shares between 1 December 2016 and her death. (4 marks)

(b) Calculate the increase in the legacy to the charity which would be necessary
in order for the reduced rate of inheritance tax to apply and quantify the reduction
in the inheritance tax liability which would result. (5
marks)

(c) Explain the capital gains tax and inheritance tax advantages which could be
obtained by varying the terms of Cada’s will and set out the procedures required
in order to achieve a tax effective variation. (6 marks)

(d) In relation to capital gains tax, explain what beneficial actions Cada could
have carried out in the tax year of her death in respect of her shareholdings. (5
marks)
(Total: 20 marks)

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