THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Inheritance Tax, Trusts & Estates
May 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Joe Jones is 64 years old and is UK resident and domiciled. He has two adult children and three
minor grandchildren.
His wife, Beatrice, died four years ago leaving her £800,000 estate, including her share of their
home (The Cottage), to the Jones Family Will Trust. This provides an interest in possession to Joe
for his life and on his death to their grandchildren in equal shares absolutely. Beatrice had made
no lifetime gifts in the seven years prior to her death.
Joe is concerned about the Inheritance Tax payable on his death and would like to take steps to
reduce this. He has made no lifetime gifts to date. Joe holds the following assets:
£
Shares in listed companies 175,000
Half share of The Cottage 625,000
Pension fund 800,000
Cash in bank accounts 60,000
ISAs 80,000
Artwork (not qualifying for conditional exemption) 140,000
Total £1,880,000
Joe had a second pension fund of £500,000 which he used to purchase a single life annuity of
£60,000 per annum with no guaranteed minimum period of payment.
Joe has a Will which leaves £200,000 to Age UK (a UK registered charity) and the remainder of his
assets as to one third to each of his two children and the remaining one third to his grandchildren.
Joe’s brother, Bill, died on 6 March 2022 and left half his estate to Joe and half to their sister Rose.
The estate is still in administration, but Joe’s share will be approximately £300,000. No Inheritance
Tax was paid on Bill’s estate.
The assets of the Jones Family Will Trust are:
£
Half share of The Cottage 625,000
Shares in listed companies 175,000
Cash 50,000
Total £850,000
Requirement:
1) Calculate, with explanations, the Inheritance Tax which would arise on Joe’s death.
(6)
2) Explain the Capital Gains Tax and Inheritance Tax consequences of using a
Disclaimer or a Deed of Variation and conclude which option would assist Joe with
removing his inheritance from Bill from his estate. (6)
3) Advise what other steps could be taken during Joe’s lifetime to reduce the Inheritance
Tax. (3)
Total (15)
,2. Margaret Moore died in December 2021 and is survived by her twin daughters Daisy and Lily who
are 14 years old. By her Will, Margaret left her estate to a discretionary trust for the twins until they
are 18 years old.
Margaret’s husband died 10 years ago leaving his £2.5 million estate to her. He made no gifts in
his lifetime.
Margaret was UK domiciled and had made no gifts in the seven years prior to death.
At her death, her estate consisted of the following:
1) Her London home valued at £2 million and its contents which were worth £200,000.
2) An office, from which she operated her business as an architect through her company Plan
to Build Ltd, worth £800,000.
3) 100% of the shares in her trading company, Plan to Build Ltd, valued at £300,000. She
established the company five years ago and it holds no investment assets.
4) In October 2019, Margaret had inherited a painting on the death of her mother as a specific
legacy. The painting was then worth £125,000 and Inheritance Tax of £45,000 was paid. The
painting is now worth £140,000.
5) Cash in her bank account of £30,000.
6) Investments of £120,000.
She had the following liabilities:
1) A mortgage of £500,000 secured on her home. The mortgage was taken out three years ago
and was used to purchase the office.
2) A balance owing on her credit card of £4,000.
Funeral expenses were £5,000.
In November 2017, Margaret inherited a property in Spain from her father. The property was then
worth £200,000 and Inheritance Tax of £75,000 was paid. Margaret sold the property in December
2019 and spent the proceeds on improving her London home.
Requirement:
1) Calculate with explanations the Inheritance Tax due on Margaret’s death. (7)
2) Explain the tax treatment of the Trust for Margaret’s children and any appropriate
claims and elections which could be made. (8)
Total (15)
, 3. Donald Rice is UK resident and non-UK domiciled. He became UK deemed domiciled in April 2019.
In February 2016, he created the Donald Discretionary Trust in order to protect his wealth from UK
tax. The trustees have always been Guernsey resident. The beneficiaries of the Trust are Donald
and his two UK resident adult children. Donald has not settled any other trusts.
New trustees, in Guernsey, have recently been appointed and have asked for UK tax advice for the
trust. No UK tax advice has previously been taken and no UK tax filings have ever been made by
the trustees or the settlor.
No income or capital distributions have been made to the beneficiaries. The trust has not been
added to since commencement. The current values of the trust's assets are as follows:
£
Cash in a Guernsey bank account 140,000
Commercial rental property in the UK – Meadowview 400,000
100% share in Rice Ltd 800,000
£1,340,000
Notes
1) Rice Ltd is a non-UK resident investment company. In May 2016, it acquired a UK residential
property in London for £750,000, which is rented to a third party. The property is currently
worth £775,000. The company also holds £25,000 in a Guernsey bank account.
2) The trustees have received rental profits of £25,000 per annum from Meadowview since
March 2016 when it was purchased for £350,000. The trustees are proposing to sell the
property in the current tax year.
Requirement:
1) Explain any current or historic Income Tax and Capital Gains Tax liabilities arising to
the trustees and the settlor. (13)
2) Explain the current Inheritance Tax position for the trustees and the settlor and how
this could be improved. (7)
Total (20)
ADVANCED TECHNICAL
Inheritance Tax, Trusts & Estates
May 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Joe Jones is 64 years old and is UK resident and domiciled. He has two adult children and three
minor grandchildren.
His wife, Beatrice, died four years ago leaving her £800,000 estate, including her share of their
home (The Cottage), to the Jones Family Will Trust. This provides an interest in possession to Joe
for his life and on his death to their grandchildren in equal shares absolutely. Beatrice had made
no lifetime gifts in the seven years prior to her death.
Joe is concerned about the Inheritance Tax payable on his death and would like to take steps to
reduce this. He has made no lifetime gifts to date. Joe holds the following assets:
£
Shares in listed companies 175,000
Half share of The Cottage 625,000
Pension fund 800,000
Cash in bank accounts 60,000
ISAs 80,000
Artwork (not qualifying for conditional exemption) 140,000
Total £1,880,000
Joe had a second pension fund of £500,000 which he used to purchase a single life annuity of
£60,000 per annum with no guaranteed minimum period of payment.
Joe has a Will which leaves £200,000 to Age UK (a UK registered charity) and the remainder of his
assets as to one third to each of his two children and the remaining one third to his grandchildren.
Joe’s brother, Bill, died on 6 March 2022 and left half his estate to Joe and half to their sister Rose.
The estate is still in administration, but Joe’s share will be approximately £300,000. No Inheritance
Tax was paid on Bill’s estate.
The assets of the Jones Family Will Trust are:
£
Half share of The Cottage 625,000
Shares in listed companies 175,000
Cash 50,000
Total £850,000
Requirement:
1) Calculate, with explanations, the Inheritance Tax which would arise on Joe’s death.
(6)
2) Explain the Capital Gains Tax and Inheritance Tax consequences of using a
Disclaimer or a Deed of Variation and conclude which option would assist Joe with
removing his inheritance from Bill from his estate. (6)
3) Advise what other steps could be taken during Joe’s lifetime to reduce the Inheritance
Tax. (3)
Total (15)
,2. Margaret Moore died in December 2021 and is survived by her twin daughters Daisy and Lily who
are 14 years old. By her Will, Margaret left her estate to a discretionary trust for the twins until they
are 18 years old.
Margaret’s husband died 10 years ago leaving his £2.5 million estate to her. He made no gifts in
his lifetime.
Margaret was UK domiciled and had made no gifts in the seven years prior to death.
At her death, her estate consisted of the following:
1) Her London home valued at £2 million and its contents which were worth £200,000.
2) An office, from which she operated her business as an architect through her company Plan
to Build Ltd, worth £800,000.
3) 100% of the shares in her trading company, Plan to Build Ltd, valued at £300,000. She
established the company five years ago and it holds no investment assets.
4) In October 2019, Margaret had inherited a painting on the death of her mother as a specific
legacy. The painting was then worth £125,000 and Inheritance Tax of £45,000 was paid. The
painting is now worth £140,000.
5) Cash in her bank account of £30,000.
6) Investments of £120,000.
She had the following liabilities:
1) A mortgage of £500,000 secured on her home. The mortgage was taken out three years ago
and was used to purchase the office.
2) A balance owing on her credit card of £4,000.
Funeral expenses were £5,000.
In November 2017, Margaret inherited a property in Spain from her father. The property was then
worth £200,000 and Inheritance Tax of £75,000 was paid. Margaret sold the property in December
2019 and spent the proceeds on improving her London home.
Requirement:
1) Calculate with explanations the Inheritance Tax due on Margaret’s death. (7)
2) Explain the tax treatment of the Trust for Margaret’s children and any appropriate
claims and elections which could be made. (8)
Total (15)
, 3. Donald Rice is UK resident and non-UK domiciled. He became UK deemed domiciled in April 2019.
In February 2016, he created the Donald Discretionary Trust in order to protect his wealth from UK
tax. The trustees have always been Guernsey resident. The beneficiaries of the Trust are Donald
and his two UK resident adult children. Donald has not settled any other trusts.
New trustees, in Guernsey, have recently been appointed and have asked for UK tax advice for the
trust. No UK tax advice has previously been taken and no UK tax filings have ever been made by
the trustees or the settlor.
No income or capital distributions have been made to the beneficiaries. The trust has not been
added to since commencement. The current values of the trust's assets are as follows:
£
Cash in a Guernsey bank account 140,000
Commercial rental property in the UK – Meadowview 400,000
100% share in Rice Ltd 800,000
£1,340,000
Notes
1) Rice Ltd is a non-UK resident investment company. In May 2016, it acquired a UK residential
property in London for £750,000, which is rented to a third party. The property is currently
worth £775,000. The company also holds £25,000 in a Guernsey bank account.
2) The trustees have received rental profits of £25,000 per annum from Meadowview since
March 2016 when it was purchased for £350,000. The trustees are proposing to sell the
property in the current tax year.
Requirement:
1) Explain any current or historic Income Tax and Capital Gains Tax liabilities arising to
the trustees and the settlor. (13)
2) Explain the current Inheritance Tax position for the trustees and the settlor and how
this could be improved. (7)
Total (20)
