IHTM26124 - Step 4 - grossing up: how to decide whether specific gifts out of the free estate bear their own tax

As a result of IHTA84/S211, specific gifts under the deceased’s Will or codicil normally do not bear their own tax.

The exceptions to this general rule are

• where there is an express direction in the Will (IHTM12041) or codicil (IHTM12041) that a gift has to bear its own tax - for example a gift of unlisted shares to a son on condition that he pays the tax on them
• where some legacies (IHTM26133) are made by a variation (IHTM35011) accepted as within IHTA 84/S142, the beneficiary agrees that a gift shall bear its own tax
• where the gift is of property situated outside the UK - for example a gift of a bank account in Germany - the gift must bear its own tax unless there is a contrary intention expressed in the Will
• under IHTA84/S42 (4) where legal rights in Scotland are claimed by a person entitled to them

If you have a specific gift which is not within one of these exceptions but which the taxpayer or agent claim bears its own tax, you should refer the case to Technical.

Where a Will disposes of both UK and foreign property, gifts may in strictness be payable

• partly out of property which bears its own tax, and
• partly out of property which does not bear its own tax

If so, it may be appropriate technically to apportion the gifts rateably between the two parts.  But in this situation you should assume that gifts of money are payable wholly out of the UK estate (and so do not bear their own tax) unless

• it is plain on the facts of the case that this is not so, or
• the taxpayer or agent claims that the gifts should be apportioned between the two types of property

You should only investigate further if the tax at stake is likely to be worthwhile.