How to Calculate Quick Succession Relief

Quick Succession Relief is something that has often come up in both the AF5 and AF1 written exams.  It’s one of those formulas you commit to memory for an exam and then probably forget instantly, so we thought we’d put together a quick example to help those studying for any of the exams where taxation can rear its head.

THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2018/19.

What is Quick Succession Relief?

Quick Succession Relief is intended to alleviate cases where the same assets would have been subject to Inheritance Tax twice within a relatively short period of time (5 years).

It allows a proportion of the tax paid on the first death to be credited against the inheritance tax paid on the second death.  If death should occur within one year, then the proportion is 100% and this reduces down to 20% if the second death occurs within 5 years of the first.

Example of How Quick Succession Relief is Applied

Let’s look at an example:

Jo dies leaving her estate of £350,000 to Gill.  Inheritance tax was paid of £10,000.  Gill dies 3.5 years later.

On Jo’s death, Gill’s estate is increased by £340,000

The amount of tax eligible for tax relief is worked out as:

• The gross estate minus tax – £340,000
• Divided by the gross estate of £350,000
• Multiplied by the tax paid of £10,000

£340,000/£350,000 x £10,000 = £9,714

As Gill died 3.5 years after Jo, the percentage used is 40%

£9,714 x 40% = £3,885

Inheritance tax on Gill’s estate is therefore reduced by £3,885.

You should note that the relief does not apply where:

• the earlier transfer to the deceased person was:
  • exempt
  • chargeable but tax was not paid, because it was below the threshold
  • more than 5 years before the death

Grab the resources you need!

If you’re studying for your CII R03 exam, and you’re wanting to feel more confident on exam day, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the R03 taster calculation workbook now!

Alternatively, you can download a taster resource for R06, AF1 or AF5 if one of those exams is your study challenge.