IHTM14821 - Lifetime transfers: associated operations: why are the provisions necessary?
Inheritance tax is charged on the value transferred by a chargeable transfer IHTA84/S1 (IHTM04021). The basic scheme of the legislation mainly focuses on a particular transfer made by a particular person. When looking at chargeable transfers for Inheritance Tax, you consider the loss to the estate on each disposition (IHTM04054). This can give an opportunity to avoid tax through artificially splitting an intended transfer into a number of dispositions.
Example
Tina has a 100% shareholding in ABC Ltd. At 11 June 2011 it is valued at 拢100,000.
Tina transfers
- a 33% holding to Steven on 11 June 2011
- a 33% holding to Steven on 12 June 2011 and
- a 34% holding to Russell on 13 June 2011
Following Tina바카라 사이트檚 death in August 2011, the loss to the estate on each transfer is individually valued at
- 拢43,000
- 拢26,000, and
- 拢17,000 respectively.
A total of 拢86,000
The total of the individual transfers for Inheritance Tax (IHT) is only 拢86,000 but Tina had effectively given away 拢100,000 worth of assets.
The legislation at IHTA84/S268 counters this in certain circumstances so that you can look at the overall effect of several events through the concept of 바카라 사이트檃ssociated operations바카라 사이트�.
The effect of associated operations is extended or limited in various areas of IHT legislation, as explained in the following pages.