IHTM14235 - Normal expenditure out of income: life policy linked with an annuity

Premiums paid by the deceased on a policy on their life which benefits another person may qualify for the IHTA84/S21 (1) exemption. If, however, the deceased had purchased an annuity ( IHTM20631), you must consider whether the policy and annuity should be treated as linked together in a back-to-back arrangement ( IHTM20371).

If the policy and annuity are found to constitute a back-to-back arrangement, the gifts by way of payment of premiums on the policy are excluded from the S21(1) exemption and cannot be relied on to establish the normality of other gifts.

Also, you must exclude the gifts entirely from any consideration of the sufficiency of the deceased's income to maintain their usual standard of living in relation to normal expenditure gifts.

The Actuarial Team will decide on and advise you whether or not the exemption can be allowed in these cases.