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IHTM26152 | Step 4 - four stage grossing calculations: the four stages

From HM Revenue & Customs · Inheritance Tax Manual

The four stages to the grossing calculation are as follows

Stage 1 (IHTM26153)

Gross up the chargeable specific gifts not bearing (IHTM26123) their own tax at the rate appropriate to their total value. This stage requires the same calculation (IHTM26141) as where the only chargeable gifts are specific gifts (IHTM26011) not bearing their own tax.

Stage 2 (IHTM26154)

Using the figure produced by the calculation at Stage 1, make an initial determination of the chargeable estate. You should do this by

  1. adding to that figure any chargeable specific gifts bearing their own tax. This produces an initial total value for the chargeable specific gifts

  2. add the value of any exempt gifts to the total value of all the chargeable specific gifts

  3. subtract that total from the value of the estate to find the initial value of the residue.

  4. calculate the value of the chargeable part of the residue.

The total of the chargeable specific gifts at (a) and chargeable residue at (d) is the initial determination of the chargeable estate.

Stage 3 (IHTM26155)

Gross up the chargeable specific gifts not bearing their own tax at the rate appropriate to the chargeable part of the estate, as determined at Stage 2.

Stage 4 (IHTM26156)

Finally determine the chargeable part of the estate. It consists of the grossed up value at Stage 3 plus the value of the chargeable specific gifts which bear their own tax and the chargeable part of residue. The process is similar to that at Stage 2.

If the taxpayer or agent asks how these stages are brought about by the wording of IHTA84/S38 you should refer the file to your manager who may ask Technical for advice in cases of particular difficulty.