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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Reduced rate for gifts to charity: merger of components: merger following an Instrument of Variation

An Instrument of Variation (IHTM35011) can be used to alter the disposition of an estate by:

  • increasing an existing charitable legacy or
  • making a new gift to charity

so that an estate component will qualify for the reduced rate. As shown in the example at IHTM45011, the circumstances of an estate may be such that only a small increase in the amount being left to charity is necessary for the component to be eligible for the reduced rate, with the resulting repayment more than offsetting the additional charitable legacy.

If a beneficiary varies their entitlement so that another component will be able to benefit from the reduced rate, the provisions of s.142(3) will not normally apply as the variation is only bringing about an extra reduction in tax over and above the reduction that would already arise through an increase in the amount qualifying for charity exemption. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)