Incidence of tax on specific gifts

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Incidence of tax on specific gifts
  • What is a specific gift?
  • Application of exemptions to specific gifts
  • Tax free and tax bearing gifts
  • Calculating the tax on tax bearing gifts
  • Calculating the tax on tax free gifts
  • Abatement

What is a specific gift?

A specific gift, where the term refers to a disposition by Will, is generally understood to be a bequest of a defined asset, such as a gold watch. A pecuniary legacy of a defined amount is also a specific gift. Inheritance tax legislation defines a specific gift negatively as meaning “any gift other than a gift of residue or of a share in residue”. This is somewhat circular since residue is what is left after debts, expenses and legacies have been paid. Nevertheless it is clear that a specific gift is a particular item or quantified amount, whereas a residuary gift is part or all of what is left. If the gift is a share of residue it is defined as a division, fraction, or percentage of an unquantified amount.

IHTA 1984, s 42

Specific gifts include the following:

  • a single personal or household item eg a diamond ring, a painting, a motor vehicle
  • a collection of items eg a stamp collection, all household furniture, a library of books
  • a devise of land and buildings, eg a farm, the deceased’s residence
  • a pecuniary legacy, defined as a fixed amount, eg £20,000
  • a gift of money defined by its origin or a formula, eg “the money in my Yorkshire Building Society account” or “half the proceeds of sale of the Lowry painting”
  • a gift of shares, eg “my shares in Marks and Spencer” or “my share portfolio held by Charles Stanley stockbrokers”
  • property claimed as ‘legal rights’ under the law of Scotland (IHTA 1984, s 42(4))
  • a nil rate band legacy, including a gift of the balance available after taking account of lifetime gifts, eg “the maximum amount which could be

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