Step 4 - simple grossing calculations: calculation when there is a lifetime cumulative total in excess of the threshold
Chargeable specific gifts free of tax × (100 ÷ 60).
Facts again as in Example 1 at IHTM26142, except that there is a lifetime cumulative total of £240,000. The date of death is 1 May 2000. The chargeable specific gifts (IHTM26011) all free of tax (IHTM26003), total £264,000. There is also chargeable settled property (IHTM16000) valued at £250,000.
In practice, because the lifetime cumulative total exceeds the threshold of £234,000, tax at 40% is payable on the whole of the chargeable death estate. Consequently, the full amount of the chargeable specific gifts totalling £264,000 has to be grossed up at 40%. The calculation is
£264,000 (100 ÷ 60) = £440,000
The calculation can easily be checked by deducting tax at 40% from the £440,000. Tax at 40% is £176,000. The difference is £264,000 which is the ungrossed value of the chargeable specific gifts.