IHTM29124 - Calculating yield: Where there are reliefs against tax
Example 5
The deceased died on 1/12/2007. IHT intervention led to
increases in value of both the house and lifetime transfers.
As initially assessed:
| Entry A | Entry B/gift 2/03/03 | Total | |||
| Value of title | + | £800,000 | + | £350,000 | |
| Tax | + | £320,000 | + | £20,000 | |
| Less taper relief | - | £12,000 | |||
| Net tax | £320,000 | £8,000 | £328,000 |
As finally assessed:
| Entry A | Entry B/gift 2/03/03 | Total | |||
| Value of title | + | £875,000 | + | £420,000 | |
| Tax | + | £350,000 | + | £48,000 | |
| Less taper relief | - | £28,800 | |||
| Net tax | £350,000 | £19,200 | £369,000 |
Difference in overall tax = £41,200
The yield adjustments are
Increase/ Decrease
| Entry A (Residence) | £75,000 |
| Entry B (Life policy | £70,000 |
| Changes to PLCT | |
| Relief against tax | £16,800 |
Yield is calculated as 40% x (£75,000 + £70,000) =
£58,000
Less Reliefs against tax - £16,800
Yield = £41,200
You should also use the Reliefs against tax box for Double
Taxation Relief, QSR and Lifetime Double Charges Relief. Do not use
the Reliefs against tax box to make the yield ‘fit’ the
amount you think it should be.
