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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Lifetime transfers: the loss to the transferor’s estate

The general rule is that the value transferred by a transfer of value (IHTM04024) is the

  • amount by which the value of the transferor’s estate (IHTM40429) is reduced by the disposition (IHTM04023) which constitutes the transfer - called the loss to the transferor’s estate, IHTA84/S3 (1), but
  • taking no account of any excluded property (IHTM04251) which ceases to form part of the transferor’s estate as a result of that disposition, IHTA84/S3 (2).

In valuing the transferor’s estate, you should take account of the transferor’s liabilities (IHTM28002) at the time of the disposition, but only

  • if imposed by law, or
  • to the extent that they were incurred for consideration in money or money’s worth.

Often the loss to the transferor’s estate is the same as the value of the property (IHTM04030) given. But in some situations, it can be more (IHTM04055) or less (IHTM04056) than the value of that property.

The transferor’s estate consists of all the property to which they are beneficially entitled (IHTM04031). But other than taking no account of excluded property that ceases to form part of the transferor’s estate, the legislation does not

  • direct that you should not take account of the value of excluded of property which is acquired by a person’s estate as a result of a disposition, or
  • require you to disregard excluded property which is not the subject of a disposition but is part of the person’s estate both before and after a disposition of other property.

In theory, a disposition of other property could affect the value of excluded property which remains in the transferor’s estate and so affect the loss to the transferor’s estate. In practice, this situation is extremely unlikely and you will normally be able to ignore any excluded property in the transferor’s estate in valuing the estate before and after the transfer.