ACCA Advanced Taxation (ATX) Practice Exam

Is the Residence Nil Rate Band (RNRB) available on both death estates and lifetime gifts?

1. Yes, it is available on both

2. No, only on lifetime gifts

3. No, only on death estates

4. Only for direct descendants

The correct answer is: No, only on death estates

The Residence Nil Rate Band (RNRB) is a key tax relief in the UK's inheritance tax system that specifically applies to a deceased individual's estate. It allows an additional threshold for the inheritance tax exemption when a residence is passed on to direct descendants, such as children or grandchildren. This means that the RNRB is indeed applicable only at the time of death, impacting the value of the estate being inherited by the beneficiaries. Lifetime gifts, on the other hand, do not qualify for the RNRB. Instead, when an individual gifts an asset during their lifetime, the value of that gift is assessed under different tax rules, primarily focusing on the annual exemption or potentially becoming subject to the seven-year rule for larger gifts if the donor passes away within that period. Thus, the application of RNRB is strictly confined to the death estate scenario, where the full value of the property and any applicable reliefs can be calculated for inheritance tax purposes at that point. Additionally, while it’s true that the RNRB is only applicable to direct descendants when they inherit the property, this clarification focuses on the type of beneficiaries, not the situations of lifetime gifts versus death estates. Therefore, the correct understanding is that the RNRB is available only on