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HMRC internal manual

Inheritance Tax Manual

Reduced rate for gifts to charity: introduction and conditions: charitable giving condition or 10% test

The charitable giving condition is set out in IHTA84/Sch1A/Para 2(2). In order to qualify for the lower rate; the donated amount must be at least 10% of the baseline amount.

The ‘donated amount’ is defined in IHTA84/Sch1A/Para 4 as the amount of the component (IHTM45003) which is attributable to property that qualifies for charity exemption (IHTM11101). This could be a legacy of a specific amount, a share of the residue, or a share of the estate that is quantified (IHTM45003) so as to ensure the estate, or a component of the estate, will meet the 10% test.

The calculation for the ‘baseline amount’ is set out in IHTA84/Sch1A/Para 5 (IHTM45009) and is, broadly, the value transferred by a chargeable transfer (IHTM04027), but after adding back the amount that qualifies for charity exemption.