R03 IHT reliefs, gifts with reservation and pre-owned assets: free practice questions

1. Question 1 of 5

   Which asset can qualify for 100% business relief, subject to the 100% relief allowance?

   Option A: A controlling holding in a fully listed companyOption B: Shares in an unquoted trading company held for two yearsOption C: Shares in an AIM-traded company held for two years or moreOption D: Shares in a venture capital trust held for five years

   Show answer

   The answer is B: Shares in an unquoted trading company held for two years

   100% relief (within the £2.5m allowance) applies to unincorporated businesses and unquoted trading company shares of any size, including qualifying EIS and SEIS shares not traded on AIM. AIM shares and controlling listed holdings get 50%.

   Why the other options are wrong

   A

   Controlling listed holdings get 50% relief.

   C

   AIM shares now qualify for 50% relief.

   D

   VCT shares don't qualify for business relief.

2. Question 2 of 5

   Kay dies owning business property worth £4m that would otherwise qualify for 100% relief. Her husband is alive. How much business relief is given?

   Option A: £4.00mOption B: £2.50mOption C: £3.25mOption D: £2.00m

   Show answer

   The answer is C: £3.25m

   The first £2.5m (the 100% relief allowance) gets 100% relief; the remaining £1.5m gets 50%: £2.5m + £0.75m = £3.25m.

   Why the other options are wrong

   A

   100% relief is limited to the £2.5m allowance.

   B

   The excess over £2.5m still gets 50% relief.

   D

   Relief is 100% on the first £2.5m, not 50% on everything.

3. Question 3 of 5

   When both agricultural relief and business relief could apply to a farm, which is given first?

   Option A: Whichever relief the personal representatives chooseOption B: Business relief first, then agricultural relief on the balanceOption C: Agricultural relief, then business relief on any value it doesn't coverOption D: Only one of the two reliefs can ever be given

   Show answer

   The answer is C: Agricultural relief, then business relief on any value it doesn't cover

   Agricultural relief is given first on the agricultural value. Business relief can then apply to other qualifying value, such as development value and farm equipment.

   Why the other options are wrong

   A

   The order is set: agricultural relief first.

   B

   Agricultural relief takes priority.

   D

   Both can apply to different parts of the value.

4. Question 4 of 5

   Which gift is NOT caught by the gift with reservation rules even if the donor keeps benefiting?

   Option A: A gift into a trust the donor can benefit fromOption B: A gift of cash to a nephew who then pays the donor interestOption C: An outright gift to a spouse or civil partnerOption D: A gift of a house to a son

   Show answer

   The answer is C: An outright gift to a spouse or civil partner

   The reservation rules don't apply to gifts exempt as transfers to a spouse or civil partner, small gifts, wedding gifts, gifts to charities and political parties, and gifts for the national benefit.

   Why the other options are wrong

   A

   HMRC treats this as a reservation of benefit.

   B

   Continuing to receive interest is a reservation.

   D

   Gifts to children can be gifts with reservation.

5. Question 5 of 5

   Below what annual benefit value is no POAT charged?

   Option A: £12,570Option B: £3,000Option C: £1,000Option D: £5,000

   Show answer

   The answer is D: £5,000

   No POAT is charged in any year in which the cash value of the benefits is £5,000 or less. Above that, the whole value is taxed as income.

   Why the other options are wrong

   A

   That's the personal allowance.

   B

   £3,000 is the IHT annual exemption.

   C

   The de minimis level is higher.

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