Trusts and Inheritance Tax

Incidence of tax on specific gifts

Produced by Tolley
  • 19 Oct 2021 23:13

The following Trusts and Inheritance Tax guidance note Produced 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

Incidence of tax on specific gifts

What is a specific gift?

A specific gift, where the term refers to a disposition by Will, is generally understood to be a gift 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 unspecified amount.

Specific gifts include the following:

  1. a single personal or household item eg a diamond ring, a painting, a motor vehicle

  2. a collection of items eg a stamp collection, all household furniture, a library of books

  3. a devise of land and buildings, eg a farm, the deceased’s residence

  4. a pecuniary legacy, defined as a fixed amount, eg £20,000

  5. 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”

  6. a gift of shares, eg “my shares in Marks and Spencer” or “my share portfolio held by Charles Stanley stockbrokers”

  7. property claimed as ‘legal rights’ under the law of Scotland

  8. 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 given to them by this will without inheritance tax becoming payable”

Note that in the last example, the specific legacy is not quantifiable at the time the Will is written. The testator does not know which lifetime gifts will become chargeable, nor, perhaps, whether

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

LEARN MORE LEARN MORE

Popular Articles

Consortium relief

IntroductionConsortium relief enables losses of a consortium company to be transferred to consortium members in proportion to the consortium member’s interest in the consortium company, and vice versa. Consortium relief is a flexible relief which is available in several different scenarios which are

19 Oct 2021 22:59 | Produced by Tolley Read more Read more

Partial exemption de minimis limit

This guidance note provides an overview of the partial exemption de minimis rules. This note should be read in conjunction with the Partial exemption overview guidance note. If a business incurs an insignificant amount of input tax which is associated with exempt supplies (exempt input tax), it may

19 Oct 2021 22:57 | Produced by Tolley Read more Read more

Investors’ relief

Investors’ relief is a capital gains tax (CGT) relief on the disposal of qualifying shares in an unlisted company. A taxpayer making a disposal that qualifies for investors’ relief will pay tax at a rate of 10%.Although it is a separate relief, the rules for investors’ relief were intended as an

22 Dec 2021 21:32 | Produced by Tolley Read more Read more