ACCA Advanced Taxation (ATX) Practice Exam

What are the implications of large cash balances in terms of excepted assets?

1. Always exempt from IHT

2. May be counted against the estate value

3. Considered used for business purposes

4. Qualified for immediate deduction

The correct answer is: May be counted against the estate value

The correct answer emphasizes that large cash balances can significantly influence the estate's overall value for Inheritance Tax (IHT) purposes. High cash holdings are relevant when assessing the value of an estate, as they are typically considered part of the net assets that form the basis for IHT calculations. When evaluating an estate, all assets—including cash balances—are generally included unless they are categorized as excepted assets. While cash may serve various purposes, including being a liquid asset, it does not automatically qualify for exemption or deduction. Therefore, when valuing the estate, large cash balances may indeed count towards the total value, potentially increasing the IHT liability. The other options do not accurately capture the implications of cash balances concerning excepted assets. They either suggest automatic exemption or misinterpret how cash holdings are treated in the context of business assets or deductions, which does not directly relate to their impact on the total estate value considered for IHT purposes.