Examination Timing: 00H01M37S
Elisabeth Thompson, a seasoned entrepreneur, has been a partner in a thriving interior design partnership, "Innovative Designs LLP," based in Cambridge, for the past 15 years. She holds a one-third interest in the partnership. With two other partners in the business, Elisabeth is considering her estate planning options and seeks advice regarding potential tax implications after her passing. She is particularly concerned about whether her share of the partnership will be subject to Inheritance Tax (IHT).
Given that Elisabeth has owned her share for more than two years, which of the following is correct regarding the IHT liability of her partnership share upon her death?
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Your selected option: A
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The correct choice is D. Under the Inheritance Tax Act 1984, specifically section 107, business property relief is available for ownership of a business or partnership share, provided the ownership has been maintained for at least two years before the owner's death. Elisabeth qualifies for 100% relief from IHT on her partnership share because she has owned it for significantly longer than the minimum required period. This relief is designed to prevent high tax charges from disrupting ongoing businesses upon the death of an owner.
Key Learning Points:
Business Property Relief (BPR): This relief is critical in reducing the IHT burden on businesses, ensuring they can continue to operate despite the change in ownership due to the owner’s death.
Qualifying Period: Ownership of the business interest must exceed two years at the time of death to qualify for this relief.
Impact on Estate Planning: Understanding the nuances of IHT and BPR is essential for effective estate planning, especially for business owners.
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