ACCA Advanced Taxation (ATX) Practice Exam

How long is relief available for qualifying loan interest payments for inheritance tax purposes?

1. Relief is available for three years

2. Relief is available for one year

3. Relief is available for five years

4. Relief is available indefinitely

The correct answer is: Relief is available for one year

For inheritance tax purposes, relief for qualifying loan interest payments is typically available for one year. This reflects the guidelines under which interest costs that are incurred on qualifying loans used to meet inheritance tax obligations can be deducted from the taxable estate for a limited duration. This one-year time frame is structured to provide relief without extending the period unnecessarily, ensuring that any tax advantages for borrowing related to potential estate taxes are time-bound, allowing for effective estate management and planning. While the other options suggest longer periods of relief, they do not align with the established regulations regarding the time limits for interest expense deductibility in the context of inheritance tax. Understanding this time limitation is crucial for tax planning strategies, as it helps individuals to assess their financial positions concerning potential tax liabilities accurately.