Kate acquired 100% of the shares in KBC Limited, a UK resident trading company, for £180,000 in August 2002 and had been the managing director since that date.

On 1st May 2019, Kate decided to make a gift of 50% of the company to her daughter, Lily and gave 25% to her son, Matt on 10th June 2019.

For capital gains tax purposes, a 50% shareholding at the time of the gift was valued at £1,000,000 and a 25% shareholding at £400,000.

For inheritance tax purposes the following valuations are appropriate:

100% shareholding £2,500,000

50% shareholding £1,000,000

25% shareholding £400,000

On 1 May 2019, Kate resigned as a director. Lily had worked for the company for many years and was appointed as a director on 1 May 2019. Matt has never worked for KBC Limited.

Kate has never previously made any capital gains or lifetime gifts for inheritance tax.

a) Calculate the IHT value of each of the transfers on 1st May 2019 and 10th June 2019. Business Property Relief should be ignored.

(6 marks)

b) Assuming that gift relief elections are made, calculate the capital gains tax costs of Lily and Matt’s shareholdings in KBC Limited.

(6 marks)

Kate left the UK on 5th April 2021, and moved to the country of Saltava, becoming non-UK resident.

In August 2021, an unexpected offer was received of £4,000,000 for 100% of the shares in KBC Limited.

c) Calculate Lily and Matt’s capital gains tax liabilities as a result of the sale in August 2021. Both are higher rate taxpayers and have already used their capital gains annual exemptions for 2021/22.

(6 marks)

d) Explain Kate’s UK capital gains tax position on the share sale in August 2021 and how this would be impacted if she decided to return to the UK to live in January 2024.