IHTM11013 | Groups of exempt transfers: quantifying the exemption

From HM Revenue & Customs · Inheritance Tax Manual

For the group (IHTM11011) of exemptions which can apply both on lifetime and death (IHTM11012), the transfer of value (IHTM04024) is an exempt transfer to the extent that the value transferred (IHTM04028) is attributable to (broadly) the property received by the exempt body.

But, there are certain special situations that should be dealt with as follows

Where the value transferred (IHTM04028) on a lifetime transfer (on the basis of the loss to the transferor’s estate) exceeds the value of the property given (valued by itself), the exemption extends to the whole value transferred.

Example

Agnes owns 51% of the shares in Xenoxia Limited, an investment company.

Agnes gives 2% of the company’s shares to a charity absolutely and unconditionally.

The charity exemption applies to the difference between the value of 51% and 49%, not just to the value of the 2% holding given.

Where a transfer of value (IHTM04024) is only partly exempt (IHTM26001), the extent to which the transfer is exempt is governed by special rules in Chapter III of Part II. These rules can affect the value of specific legacies (IHTM26011) and residue (IHTM26003).
The exemption may also need to be restricted if exempt beneficiaries settle claims (IHTM11026) against the estate out of their own money.
Where the will of a person domiciled (IHTM13000) abroad disposes of their UK estate and some or all of their world estate, exemption for pecuniary legacies (IHTM12082) should be given against the UK estate in the proportion it bears to the worldwide estate, and not against the UK estate alone. Any case where you have difficulty obtaining details of the world estate, or where our official practice meets resistance, should be referred to Technical.