Inheritance Tax Act 1984 section 29

Loans – modifications of exemptions

Section 29 modifies the way inheritance tax exemptions apply when a transfer of value takes the form of a loan — that is, where one person allows another (the borrower) the use of money or other property, rather than making an outright gift.

• Where a loan is made between spouses or civil partners, the borrower's estate is treated as increased by the value transferred, ensuring the spouse/civil partner exemption operates correctly for loans as well as gifts
• For the small gifts exemption and the marriage/civil partnership gifts exemption, a loan is treated as if it were an outright gift, so those exemptions can apply in the normal way
• The normal expenditure out of income exemption is simplified for loans: instead of meeting the usual detailed conditions, the only requirement is that the transfer was a normal one on the part of the transferor
• For gifts to charities, political parties, housing associations, and national purposes bodies, the value transferred is attributed to the property lent, and that property is treated as given to the borrower — but only if the borrower's use is exclusively for the qualifying charitable or institutional purposes

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