IHTM14578 - Lifetime transfers: the charge to tax: additional charges: the additional tax payable (example 2)
Tony makes a gift of 拢375,000 to a discretionary trust in May 2007.
There were no other transfers in the preceding seven years.
Tony died in February 2012.
The calculation of tax immediately payable on the transfer is:
| Description of the calculation components | Value of the calculation components |
|---|---|
Capital value |
= 拢375,000 |
Less IHT nil rate band at date of transfer |
- 拢300,000 |
- |
= 拢75,000 |
Tax at 20% (half death rate) on 拢75,000 |
= 拢15,000 |
The tax on the transfer recalculated because of the death is:
| Description of the calculation components | Value of the calculation components |
|---|---|
Capital value |
= 拢375,000 |
Less IHT nil rate band at date of death |
- 拢325,000 |
- |
= 拢50,000 |
Tax at 40% (death rate) on 拢50,000 |
= 拢20,000 |
However, as the transfer was more than four, but not less than five years before the death, taper relief (IHTM14575) applies and the tax is reduced to 拢20,000 x 60% = 拢12,000.
As the recalculated tax of 拢12,000 is less than the tax already paid (拢15,000), no further tax is payable.
The difference of 拢3,000 is not repayable.