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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Step 4 - simple grossing calculations: calculation when there is a lifetime cumulative total in excess of the threshold

Where the lifetime cumulative total (IHTM31413) exceeds the threshold at the date of death and the conditions at IHTM26131 are satisfied, the grossing calculation is

Chargeable specific gifts free of tax × (100 ÷ 60).

Example

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.