IHTM14231 - Normal expenditure out of income: introduction

The exemption applies where the gifts are unconditional, and the taxpayer can show that the gifts

• formed part of the deceased’s usual expenditure ( IHTM14243)
• were made out of income ( IHTM14244), and
• left the deceased with sufficient income to maintain their normal standard of living ( IHTM14251).

The exemption does not apply to

• transfers on termination of an interest in possession ( IHTM04083) in settled property
• the deemed PETs ( IHTM04064) under IHTA84/S102 (4) and FA86/S103 (5)
• apportionments made to persons under IHTA84/S94 (transfers by close companies ( IHTM14851)).

Exemption under IHTA84/S21 does not prevent the gift which constitutes the transfer from being taxed under the GWR ( IHTM04071) rules.