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HMRC internal manual

Inheritance Tax Manual

General procedure for death transfers: special points to look out for

You will need to look out for, and carefully consider situations where spouse or civil partner (IHTM11032) exemption is deducted on

You should ascertain whether this passed by Will (IHTM12041), intestacy (IHTM12101) or by survivorship (IHTM15081) and, consequently, whether it passed to the spouse or civil partner (IHTM11032)

Partnership agreements can allow a deceased business partner’s beneficial entitlement (IHTM04031) to the partnership property to pass on death to another partner without payment. In these circumstances the partnership interest will not pass under the will. The partnership interest may qualify for business relief (IHTM25131).

  • Foreign property (IHTM27000) or a foreign domicile (IHTM13000)

The provisions of a UK will, or UK rules of intestacy, may not apply to foreign immovable property, or to the moveable estate (wherever situated) of a person who died domiciled outside the UK. There may be a foreign will, or the law of the country in which the property is situated or where the person was domiciled may apply. In some countries the surviving spouse or civil partner and children are entitled to specific parts or portions of the estate regardless of the terms of a person’s will.

Property passing under the law of Scotland

Under Scots law the surviving spouse or civil partner and the issue of a deceased person have certain rights in the estate. These are:

* in intestacy (or partial intestacy) cases, prior rights ([IHTM12201]( and
* in all cases (whether the estate passes by will or intestacy), legal rights ([IHTM12201](

There are also three areas where special rules may modify the extent of spouse or civil partner exemption and its effect on other statutory provisions. These are:

  • To the extent to which a lifetime transfer (IHTM14000) is spouse or civil partner exempt

    • it cannot be a PET (IHTM04057) (IHTA84/S3A (1) (b)), and
    • the gift which constitutes the transfer of value cannot be taxed under the GWR (IHTM04071) rules (FA86/S103 (5) (a)).
  • When a transfer of value between spouses or civil partners takes the form of a loan of money or other property, the application of the spouse or civil partner exemption is modified as follows

    • the borrower’s estate is treated as increased by the amount of the value transferred
    • IHTA84/S18 (3) does not apply. IHTA84/S18 (3) prevents (broadly) postponed (IHTM11092) and conditional (IHTM11093) gifts from being spouse or civil partner exempt)
    • IHTA84/S56 (1) and IHTA84/S56 (2) do not apply. The two subsections are anti-avoidance provisions directed at transactions involving reversionary interests (IHTM16231).
  • The IHTA84/S18 exemption can apply to a close company (IHTM14851) transfer. You should refer any deduction for exemption where this applies to Shares and Assets Valuation.