ACCA Advanced Taxation (ATX) Practice Exam

Is the Residence Nil Rate Band (RNRB) available for lifetime gifts?

1. Yes, for all gifts

2. Yes, but only for specific gifts

3. No, only for death estates

4. No, never applicable

The correct answer is: No, only for death estates

The Residence Nil Rate Band (RNRB) is a provision designed to increase the threshold for inheritance tax (IHT) for individuals who pass on their main residence to direct descendants. It is essential to understand that the RNRB is specifically applicable to estates upon death rather than to lifetime gifts. Lifetime gifts, even those that may be made shortly before death, do not qualify for the RNRB; they are treated separately in terms of IHT liability. The RNRB can only be claimed against the value of a deceased person's estate when calculating IHT at the time of their passing. Therefore, the concept of the RNRB being applied to lifetime gifts does not hold, as it is solely intended for relief against the tax on decedent properties transferred at death. This delineation between lifetime gifts and estate transfers at death is crucial in the context of inheritance tax planning. Understanding the provisions of RNRB is important for tax efficiency, especially when planning how the family home is passed on to heirs.