ACCA Advanced Taxation (ATX) Practice Exam

Under the inter-spouse exemption, what is the maximum lifetime cumulative exemption amount for a UK domiciled transferor?

1. £250,000

2. £325,000

3. £500,000

4. £1,000,000

The correct answer is: £325,000

The inter-spouse exemption allows for the transfer of assets between spouses or civil partners without incurring any immediate tax liability. In the UK, this is particularly pertinent for inheritance tax, as transfers between spouses or civil partners are exempt from tax, which supports the principle that families should be able to support one another financially without incurring additional tax burdens. For a UK domiciled transferor, the maximum lifetime cumulative exemption limit for transfers made to a spouse or civil partner is £325,000. This figure is significant because it represents the nil-rate band threshold for inheritance tax, meaning that if the total value of the estate, including any transfers to a spouse or civil partner, is below this amount, no inheritance tax is payable on that part of the transfer. The other amounts provided in the options reflect various thresholds or allowances, but £325,000 is specifically recognized for inter-spouse transfers, ensuring that a spouse can inherit the assets tax-free up to this limit. This exemption supports the financial security of the surviving spouse and promotes the transfer of wealth within the family unit seamlessly, highlighting why this amount is correct.