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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Annuity to spouse or civil partner: introduction

The value of the gift of an annuity (IHTM16211) for the purpose of the partly exempt transfer rules (IHTM26001) depends on what provision the Will (IHTM12041), or other instrument under which it is payable, makes for its payment. So the first step in quantifying the gift of the annuity is to read the full provisions in the Will or other instrument with particular reference to how the annuity is funded.

The instructions on settled property contain guidance on the nature of annuities (IHTM16211) and the rights of annuitants (IHTM16211). But you should remember that the guidance given is primarily in the context of whether there is a tax charge on the ending of an annuity, whereas you are concerned with the value of a gift of an annuity.

Although the following instructions are primarily relevant in connection with gifts of annuities to spouses or civil partners, they will apply whenever you have to value a gift of an annuity for the purposes of the partly exempt transfer provisions, whether the annuitant is the deceased’s spouse or civil partner (IHTM11032) or a chargeable beneficiary.