ACCA Advanced Taxation (ATX) Practice Exam

What is considered an excepted asset in terms of estate valuation for IHT?

1. Assets wholly used for business purposes

2. Assets not likely for future business use

3. Property inherited through family

4. Investments held for more than 10 years

The correct answer is: Assets not likely for future business use

An excepted asset in the context of inheritance tax (IHT) refers to certain assets that are not taken into account when valuing the estate for tax purposes. In this scenario, the correct choice encompasses assets that are not anticipated to be utilized in a future business context. Such assets remain outside the scope of valuation for IHT, as they do not contribute to the ongoing value that would generate future income or business operations. Assets that are wholly used for business purposes can actually qualify for reliefs such as Business Relief, depending on the specific usage and nature of the business. Property inherited through family typically forms part of the estate and is subject to IHT unless other allowances apply. Investments held for more than 10 years might still be subject to IHT, though certain investments can have their own reliefs but are generally not classified as excepted assets solely based on the time held. Thus, the key aspect of the correct answer revolves around distinguishing which assets are not expected to contribute to ongoing business activity, underlining the legal framework governing estate valuation for IHT.