TX-Ch-18 to Ch-22 & 24 & 25

Lily wishes to make gifts to her grandchildren, Tom and Patrick rather than her daughter Kim.

Why might this be beneficial for inheritance tax (IHT) purposes?

• 1. To avoid a potential double charge to IHT

• 1. To maximise the use of the nil rate band

• 1. To reduce the rate of IHT

• 1. Because there is a greater chance of the gift becoming exempt

1. Katrina made a gift of 3,000 £1 ordinary shares in CTS Ltd, an unquoted investment company. CTS Ltd has 20,000 £1 ordinary shares in issue. Before the transfer Katrina owned 11,000 of these shares. The shares are worth £18 each for a holding of 15%, £24 each for a holding of 40%, and £37 each for a holding of 55%.

   What value has been transferred by Katrina in making the gift?

• 1. £215,000

• 1. £72,000

• 1. £111,000

• 1. £54,000

On 1 August 2022 Amanda made a gift to a trust of £550,000 (after deducting available exemptions). Amanda will pay the inheritance tax arising from the gift. She has not made any previous lifetime gifts.

What is Amanda’s lifetime inheritance tax liability in respect of the gift?

• 1. £45,000

• 1. £56,250

• 1. £90,000

• 1. £137,500

Margaret died on 12 March 2023 leaving an estate valued at £450,000. On 12 July 2015 Margaret had made a gift of £15,000 to her daughter, and on 27 December 2017 she had made a gift of £75,000 to her son. These figures are after deducting available exemptions. Her estate is left equally between her two children and includes her main residence, valued at £350,000.

What is the inheritance tax liability in respect of Margaret’s estate?

• 1. £16,000

• 1. £10,000

• 1. £80,000

• 1. £180,000

Ben died on 14 February 2023. When his wife, Bella, died on 13 September 2009, only 35% of her nil rate band of £325,000 for the tax year 2009-10 was used. Ben and Bella did not have any children.

How much nil rate band may be claimed by Ben’s personal representatives on his death?

• 1. £325,000

• 1. £527,800

• 1. £536,250

• 1. £637,000

Which TWO of the following statements concerning VAT registration of Sug, a trader, are correct?

• 1. Voluntary registration will be beneficial if he makes supplies to all non-VAT registered customers

• 1. Voluntary registration will be beneficial if he makes only zero-rated supplies and has input VAT he can recover

• 1. Voluntary registration means he will avoid penalties for late registration

• 1. An advantage of voluntary registration is reduced administration

Gosia is registered for VAT and operates the cash accounting scheme. She delivers some goods to a customer on 23 May in respect of an order received on 15 May. Gosia issued the invoice on 27 May and received payment from the customer on 14 June.

What is the tax point of the supply?

• 1. 15 May

• 1. 23 May

• 1. 27 May

• 1. 14 June

Beryl is registered for VAT and is preparing her VAT return for the three-month period ended 31 March 2023. During this period, she made zero-rated supplies of £14,450 and standard-rated supplies of £19,650. These figures exclude VAT.

What amount of output VAT should Beryl account for on her VAT return for the three months ended 31 March 2023?

• 1. £3,275

• 1. £5,683

• 1. £3,930

• 1. £6,820

Barbara is registered for VAT and is preparing her VAT return for the three-month period ended 31 March 2023.

Barbara incurred input VAT of £1,338 on purchases related to zero-rated supplies and input VAT of £600 related to standard-rated supplies.

What amount of input VAT should Barbara account for on her VAT return for the three months ended 31 March 2023?

• 1. £600

• 1. £1,938

• 1. £1,338

• 1. £738

Johnnie, a sole trader, completed a VAT return for the quarter to 31 December 2022 showing output VAT of £215,000 and input VAT of £126,000.

In July 2023 Johnnie’s accountant discovered that the input VAT on the VAT return had been overstated by £7,500. This was the first time that Johnnie had made an error on a VAT return. HM Revenue and Customs (HMRC) was notified and the outstanding tax paid.

What is the minimum amount of penalty that HMRC could charge Johnnie for the error?

• 1. 0% of tax lost

• 1. 15% of tax lost

• 1. 20% of tax lost

• 1. 30% of tax lost