IHTM30312 | Attribution process: lifetime transfers
From HM Revenue & Customs · Inheritance Tax Manual
In May 2000 Terri settles the following property on relevant property trust (), the transferee () paying the tax
£160,000 cash
and
20,000 shares in XYZ Ltd, an unquoted company (the value is £240,000).
The value transferred by the transfer, which is wholly chargeable, is £400,000. The part of this value attributable to
the shares is (120,000 ÷ 200,000) or 3/5
the cash is (80,000 ÷ 200,000) or 2/5.
The part attributable to the shares qualifies for instalments because
the transferee is paying the tax
the part of the value transferred attributable to the shares exceeds £20,000, and
the shares represent more than 10% of the company’s share capital ().
The calculation of the tax immediately payable (there being no previous cumulative total) is:
Value Lifetime tax
£400,000 transfer £33,200 which splits thus:
2/5 attributable to cash £13,280 payable in one sum
3/5 attributable to shares £19,920 payable by instalments.
The transferor dies in February 2002. The additional tax on the lifetime transfer is:
Tax at February 2002 full rate £63,200
Less tax as above £33,200
Additional tax £30,000
As the shares are still held by the transferee and remain unquoted at the death, instalments are available for £18,000 - i.e. the 3/5 part of the £30,000 attributable to the shares.