INHERITANCE TAX | INHERITANCE TAX ACT 1984
IHT is charged on the ‘value transferred by a chargeable transfer’.
IHTA 1984, ss1,2
‘chargeable transfer is defined as a transfer of value which is made by an individual
but is not an exempt transfer’
Three Charging Provisions
1. Death (chargeable upon death)
2. Lifetime transfers made to individuals within 7-years prior to death (PET)
3. Lifetime gifts to a company or into a trust (chargeable immediately)
Inheritance Tax Charged upon Death
STEP 1 Identify a Transfer of Value
IHTA 1984, s5(1) – Estate
‘all the property which he was beneficially entitled to immediately before his death,
with the exception of excluded property’
Property includes:
a) Property which passes under will or upon intestacy
b) Property to which he was beneficially entitled immediately before death, but which
does not pass under will or upon intestacy
c) Property included due to special statutory provisions, including certain trust
property and property given away during lifetime, but is subject to a reservation
at the time of death
STEP 2 Find the Value Transferred
• On death, this is the value of the deceased’s estate immediately prior to death
• On lifetime transfer, this is the reduction of value to the transferor’s estate
IHTA 1984, s160 – Estate Value (known as the Probate Value)
‘the price which the property might reasonably expect to fetch if sold in the open
market immediately before death’
IHTA 1984, s171 – Modification to Value
‘where death causes the value of an estate asset to increase/ decrease, the change
in value should be taken into account’
Valuing Quoted Shares
For IHT, the value of quotes shares is taken from the Stock Exchange Daily Official
List at the date of the death or nearest trading day, which provides two values.
Value of shares is equal to the smaller value plus 25% of the difference between
the smaller and larger value.
IHTA 1984, s162 – Liabilities
Provided that they were incurred for money or money’s worth, liabilities are
deductible for IHT purposes.
IHT is charged on the ‘value transferred by a chargeable transfer’.
IHTA 1984, ss1,2
‘chargeable transfer is defined as a transfer of value which is made by an individual
but is not an exempt transfer’
Three Charging Provisions
1. Death (chargeable upon death)
2. Lifetime transfers made to individuals within 7-years prior to death (PET)
3. Lifetime gifts to a company or into a trust (chargeable immediately)
Inheritance Tax Charged upon Death
STEP 1 Identify a Transfer of Value
IHTA 1984, s5(1) – Estate
‘all the property which he was beneficially entitled to immediately before his death,
with the exception of excluded property’
Property includes:
a) Property which passes under will or upon intestacy
b) Property to which he was beneficially entitled immediately before death, but which
does not pass under will or upon intestacy
c) Property included due to special statutory provisions, including certain trust
property and property given away during lifetime, but is subject to a reservation
at the time of death
STEP 2 Find the Value Transferred
• On death, this is the value of the deceased’s estate immediately prior to death
• On lifetime transfer, this is the reduction of value to the transferor’s estate
IHTA 1984, s160 – Estate Value (known as the Probate Value)
‘the price which the property might reasonably expect to fetch if sold in the open
market immediately before death’
IHTA 1984, s171 – Modification to Value
‘where death causes the value of an estate asset to increase/ decrease, the change
in value should be taken into account’
Valuing Quoted Shares
For IHT, the value of quotes shares is taken from the Stock Exchange Daily Official
List at the date of the death or nearest trading day, which provides two values.
Value of shares is equal to the smaller value plus 25% of the difference between
the smaller and larger value.
IHTA 1984, s162 – Liabilities
Provided that they were incurred for money or money’s worth, liabilities are
deductible for IHT purposes.
