IHTM14142 - Annual exemption: relievable property
If the transfer qualifies for agricultural relief (IHTM24001) or business relief (IHTM25131) deduct the annual exemption (so far as it is available) from the value transferred after reduction by the relief.
Example
Alice makes a lifetime gift of relevant business property (IHTM25141) to the trustees of a discretionary trust. The loss to the estate is the same as the value of the property given - £400,000. The only exemption available is the annual exemption for the year. The trustees pay the tax.
The amount of the immediately chargeable transfer (IHTM04027) is:
| Loss to Alice’s estate |
£400,000 |
| which wholly qualifies for BR at 50% |
£200,000 |
| Value transferred |
£200,000 |
| Less annual exemption |
£3,000 |
| Chargeable transfer |
£197,000 |
If the donor, Alice, paid the tax, the £197,000 would be grossed up (IHTM14541).
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Additional charges
If the transferor dies within seven years of an immediately chargeable transfer you will also have to consider additional charges (IHTM14571). If the additional conditions (IHTM14579) for relief are not satisfied, you will calculate the additional tax payable on the basis that the annual exemption is deducted from the unreduced value transferred.
Therefore in the above example, for the purpose of the additional tax payable on the transfer because of Alice’s death within seven years, the annual exemption is deducted from the full £400,000, making the chargeable transfer £397,000.
