ACCA Advanced Taxation (ATX) Practice Exam

What major tax planning point is associated with Agricultural Property Relief (APR) and BPR?

1. Lifetime gifts are always better

2. Gifts should be made on death to maximize benefit

3. Transfer pricing must be calculated annually

4. All exemptions apply to lifetime transfers

The correct answer is: Gifts should be made on death to maximize benefit

The correct answer focuses on the fact that Agricultural Property Relief (APR) and Business Property Relief (BPR) can be particularly advantageous when utilized at the time of death rather than during lifetime transfers. This is because when assets are transferred upon death, their value is often assessed based on the market value at that time, which can potentially lead to a higher amount of relief available. By utilizing these reliefs at death, more significant inheritance tax savings can be achieved as the properties are often passed on without incurring immediate tax liabilities compared to lifetime gifts. This approach also allows for the exemption limits to be fully utilized, as both APR and BPR are designed to facilitate the passing down of agricultural and business assets without burdensome tax implications, effectively helping the beneficiaries. In contrast, lifetime gifts could be subjected to different tax rules and could lead to implications such as a potentially higher tax burden if not optimally planned. The statement about transfer pricing, although relevant in contexts dealing with business assets, does not directly relate to the overall efficacy of APR and BPR in tax planning. The concept of exemptions applying to lifetime transfers is also nuanced and not universally applicable, making the perspective of benefiting from these reliefs at death the strongest argument in this scenario.