I4.244 Partial exemption—examples
Partial exemption — examples 1 to 8.
Example 1 — gifts in excess of spouse exemption
T (having made no previous transfers) dies, domiciled in the UK leaving a legacy of chattels worth £200,000 and a legacy of shares worth £230,000 in a private company to his non-domiciled wife, directing that these legacies should bear their own tax. He also gave his wife a legacy of £45,000 free of tax. Residue is given to charity. No election is made for his spouse to be treated as UK domiciled.
The total value of the gifts to the non-domiciled spouse is £475,000, and the excess over the exempt £325,000 amount is £150,000. This reduces first the pecuniary legacy (because it is free of tax).
The remainder of the excess (£150,000–£45,000 = £105,000) is divided as to £48,838 ((200/430 x 105,000) to the gift of chattels, and as to the remaining £56,162 ((230/430) x 105,000) to the specific legacy of the shares.
The chargeable and exempt parts of the transfer are as follows:
| Exempt | | Chargeable | |
| chattels | £151,162 | | £48,838 | |
| shares | £173,838 | | £56,162 | |
| pecuniary legacy | — | | £45,000 | |
| £325,000 | | £150,000 | |
The effect is to divide the partly exempt legacy or legacies or residuary gifts into exempt gifts and chargeable gifts.
This is the basis from which subsequent calculations proceed — see I4.236.
Example 2 — gifts subject to tax
Example 2(a)
T dies with an estate of £800,000. He leaves a legacy of £400,000 to his son which, he directs, bears its own tax. Residue is left to his wife