Question 3

3.1 Your firm acts for Freya who is UK resident and UK domiciled. Freya has non-savings income for 2019/20 of 24,295. In addition, she has made the following disposals during the year:

Sold 2,000 shares in Lillier plc, an investment company, to her brother for 7 each when the market value was 10.50 each. Freya had purchased 4,800 shares for 9,200 in June 2010. The shares were the subject of a one-for-four rights issue at 5.50 per share in March 2012. Freya took up all of her rights.

Sold a painting for 25,900 which originally cost 5,100 in March 2005.

Sold 2,000 shares in Stuck Ltd, an unquoted trading company, for their market value of 55,000. Freya had inherited the shares from her mother in March 2007 when their market value was 42,000. The shares had originally cost Freya's mother 39,000 in January 2000. Stuck Ltd has 30,000 issued shares. Freya has worked for Stuck Ltd full time since she inherited the shares.

Freya has a brought forward capital loss of 2,000 at 6 April 2019.

Requirement

Calculate the capital gains tax payable by Freya for 2019/20. (9 marks)

3.2 Your firm acts for Hugo and Skye. Hugo was married to Skye and they had two children, Matteo and Lucinda.

When Hugo died in January 2008, he left the whole of his estate to Skye. Hugo's only lifetime transfer was a gift of 55,000 to Matteo in January 2007 on the occasion of Matteo's marriage. The nil rate band in 2006/07 was 285,000 and in 2007/08 it was 300,000.

Skye died on 1 April 2020, leaving all her assets to Matteo and Lucinda. Skye's second husband Berni inherited nothing on Skye's death. Skye had made no lifetime transfers.

At the time of her death, Skye owned the following assets:

A property in Liverpool worth 1.5 million on 1 April 2020. There was a mortgage of 300,000 outstanding on the property.

A holding of 2,000 shares (less than 1% of the issued shares) in Turner plc, a trading company. On 1 April 2020 the shares were quoted at 630p to 646p and the marked bargains were 632p, 636p and 643p.

Two antique vases. These form part of a set of three antique vases, and the values on 1 April 2020 were:
Two vases owned by Skye (value given is total for the two)	150,000
Third vase owned by Berni	90,000
Total value of the three vases valued as a set	400,000

Matteo and Lucinda do not have sufficient savings to settle the inheritance tax liability. They are concerned that they will be unable to pay the inheritance tax liability on the estate on time, as most of Skye's assets are not readily convertible into cash.

Requirements

(a) Calculate the inheritance tax payable as a result of Skye's death. (11 marks)

(b) State the date by which Matteo and Lucinda should pay the inheritance tax due in order to avoid paying any interest. (1 mark)

[Total: 21 marks]