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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Specific gifts: disallowed liabilities

As well as specific gifts (IHTM26011) IHTA84/S38 (6) makes provision for disallowed but legally enforceable liabilities that are:

  • disallowed under IHTA84/S5 (5) (liabilities incurred for less than full consideration (IHTM28382)), or
  • reduced under FA86/S103 (consideration representing property derived from the deceased (IHTM28361))

To the extent to which you disallow them you should treat these debts as specific gifts (that is as pecuniary legacies to the creditors) for the purposes of grossing up (IHTM26121)

Where you refuse a deduction for an annuity payable under a voluntary Deed of Covenant which continues after the death, the specific gift is of the value of the annuity, not the capital required to produce it.