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HMRC internal manual

Inheritance Tax Manual

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HM Revenue & Customs
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Reduced rate for gifts to charity: elections: election to opt out

There may be circumstances where the administrative costs, such as valuing assets, outweigh the benefit of the reduced rate of tax. An example might be where an item of land is specifically bequeathed to charity. Whilst there is no need for a precise value to be agreed before the item is exempt from IHT, it will be necessary to agree a value to see whether or not the 10% test is met.

For this reason IHTA84/Sch1A/Para 8 contains an option for the taxpayers to elect for the estate component concerned to be treated as if the donated amount for the component is less than 10% of the baseline amount, whether or not it actually is.

Where such an election is made, the component concerned is subject to Inheritance Tax at the full 40% rate.

The process for making an election is explained at IHTM45041.