Inheritance Tax Act 1984 Schedule 1A paragraph 7

Election to merge parts of the estate

Paragraph 7 allows an election to be made to merge a qualifying component of the estate with one or more other eligible parts, so that they are treated as a single component for the purposes of testing whether the 10% charitable giving threshold is met.

• A component qualifies if its charitable donations already equal at least 10% of its baseline amount, and it can then be merged with other parts of the estate that have not individually met the threshold
• The eligible parts that may be merged with the qualifying component are: the survivorship component, the settled property component, the general component, and any property treated as part of the estate under the gifts with reservation rules
• If the merged (deemed single) component meets the 10% test overall — that is, the combined donated amount is at least 10% of the combined baseline amount — all the property in that merged component qualifies for the reduced 36% rate of inheritance tax
• The election must be made jointly by all appropriate persons connected with the qualifying component and each eligible part being merged, including beneficiaries, trustees, personal representatives, or those in whom the property is vested