Test your understanding: answers
Statement A is false
Motor cars are exempt assets for the purposes of CGT, so there are no CGT implications on the gift of a motor car.
Motor cars are not exempt assets for the purposes of IHT. Accordingly, the gift of a motor car from one individual to another is a potentially exempt transfer.
Statement B is true
There are IHT implications because, on a sale at an undervalue, there is a fall in value of the vendor’s estate.
There are CGT implications because the sale by an individual of a building is a disposal by a chargeable person of a chargeable asset, such that a chargeable gain or allowable loss will need to be calculated (using deemed proceeds of £630,000).
Assets situated overseas are not subject to IHT.
Gains on assets situated overseas may be taxed on the remittance basis rather than the arising basis. This may require a payment of the remittance basis charge.
Business property relief (IHT)
Gerald must have owned the shares for at least two years or replaced other business property which, together with the shares, he has owned for at least two out of the previous five years.
At the time of the gift there must not be a binding contract for a future sale of the shares by the donee.
The donee must still own the shares when Gerald dies (or must have pre-deceased Gerald whilst still owning the shares).
The shares must still qualify for BPR when Gerald dies, or when the donee dies if earlier.
Gift relief (CGT)
The donee must be resident in the UK.
The donee must agree to sign the election together with the donor.