I thought this issue had been discussed before but I can’t find the thread re a quirk in the new rules on CLTs.
The new rules wording discussed in the Government document Reforms to Inheritance Tax agricultural property relief and business property relief: application in relation to trusts - GOV.UK suggests that when looking at a chargeable transfer after April 2026 a BPR/APR asset is 50% relief unless within the £1m allowance.
However, the example in the document shows the 50% relief against the full IHT rate of 40% rather than against the lifetime chargeable rate of 20%. So the effect is that chargeable lifetime gifts over £1m after April 2026 even if qualifying BPR/APR property the IHT rate is 20% the same as non BPR/APR assets i.e. there is effectively no 50% relief. Do others agree this is as intended as I can’t quite square this within the draft legislation.
I’m looking at how this might affect CLT’s where the settlor doesn’t survive 7 years. The draft legislation suggests that CLT’s falling taxable on the death estate essentially end up with the same calculation with the amount over £1m being 50% of the 40% - so 20% chargeable. In effect, no further tax would be due on death.
Is my understanding correct or do we think the example in the document is an anomaly?