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HMRC internal manual

Inheritance Tax Manual

Orders under the Inheritance (Provision for Family and Dependants Act) 1975: example of an order under s.10


The deceased, before 18 March 1986 and within six years of death, makes a lifetime gift to his mistress of £100,000 gross, upon which she pays the tax of £5,225. In proceedings under the I(PFD)A 1975 after his death, the court finds that an order under s.10 is appropriate, and orders the mistress to make the maximum provision of £94,775 as an addition to the deceased’s ‘net estate’ (which alone can be the subject of an Inheritance order).

On a claim by the deceased’s personal representatives, the £5,225 tax is repaid to them and, for the purpose of the tax charge on the death estate, the deceased’s lifetime cumulations are reduced by £100,000. Irrespective of the claim, the deceased’s death estate is increased by £94,775 plus the £5,225 tax repayment claimed by the personal representatives. The revised estate is taxed at death rates except so far as given by the combined effect of the will or intestacy and of the court order to exempt beneficiaries.

If the order had required the mistress to provide £50,000, the repayment would be limited to so much of the £5,225 tax as was attributable to the equivalent of £50,000 grossed up as the top slice of the value transferred. There would be corresponding limitations on the reduction in the lifetime cumulations and in the amounts to be included in the death estate.