ACCA Advanced Taxation (ATX) Practice Exam

In the context of inheritance tax, what does the QSR formula represent?

1. The total IHT payable on the estate

2. IHT from the first death multiplied by the appropriate percentage

3. The value of gifts made during someone's lifetime

4. A calculation of the estate's net value

The correct answer is: IHT from the first death multiplied by the appropriate percentage

The QSR formula, which stands for "Quick Succession Relief," is related to inheritance tax calculations. It serves to provide relief from the inheritance tax charge in situations where an individual passes away and subsequently, their beneficiaries make further transfers of value within a limited timeframe. The correct answer reflects the mechanism of the formula, which involves taking the inheritance tax (IHT) computed from the first death and then multiplying it by a specific percentage that applies based on the circumstances surrounding the transfer. This aspect of the QSR formula allows for a reduction in the tax liabilities for the recipient of an estate if there have been multiple deaths within a short succession period. Thus, it is specifically designed to benefit estates where further financial transfers occur shortly after the first individual's passing, enabling beneficiaries to reduce potential financial burdens from multiple inheritance tax charges. The other choices do not directly capture the essence of the QSR formula. Total IHT payable on an estate pertains to a broader calculation that encompasses all taxes owed without the specific focus on loyalty that the QSR formula provides. The value of gifts made during someone's lifetime is related to lifetime transfers and is treated separately from the considerations within the QSR context, as it has implications for taxation at the time of giving rather than post-death