IHTM35219 | Provisions relating to Legitim: IHT consequences of an election under s.147(4)

Under the alternative basis provided by IHTA84/S147(4), tax is charged at the testator’s death as if the testamentary provisions in favour of the surviving spouse or civil partner (IHTM11032) have taken effect. In other words on the basis that those entitled to claim legitim (IHTM12221) have not taken their legitim. You can therefore allow the full spouse or civil partner exemption (IHTM11031) resulting from the testamentary provision. Provided that all those entitled to claim legitim renounce (IHTM12229) their claims, no adjustment of the tax charge on the testator’s death will be necessary.

If, however, any of those entitled to make a claim, do claim their legitim within the statutory period (IHTM35213) the tax charge on the testator’s death will have to be recalculated and tax charged on the amount claimed as legitim. This tax must be calculated on the basis that the legitim fund had been paid out in full at the testator’s death (excluding any part of the fund renounced before any claim has been made). You should apportion the tax rateably among those entitled to claim legitim (excluding any who have already renounced their claims). Interest is due on the resulting tax from the date on which it would originally have become due.

The meaning of IHTA84/S147(4) is not entirely clear. Our view is that where those under 18 when the election for IHTA84/S147(4) was made, claim legitim on reaching age 18, tax is to be calculated on the whole legitim fund (except to the extent that shares in that fund were renounced, at the outset, by persons over 18), but that tax is payable only on the shares of the legitim fund eventually claimed. Where persons over 18 at the testator’s death, took their legitim entitlement at the outset and tax was paid on that basis at that time, their shares of legitim are not liable to any further tax charge when claims are later made by the younger children on reaching 18. There is an example at IHTM35220.