Inheritance Tax Act 1984 section 37

Abatement of gifts

Section 37 deals with what happens when an estate does not have enough assets to fulfil all the gifts made, and how those gifts must be scaled back for inheritance tax purposes.

• Where an estate has insufficient assets to meet gifts in full (ignoring any tax charge), the gifts are treated as reduced accordingly for inheritance tax purposes.
• If the total value attributed to specific gifts under section 38 exceeds the value transferred by the estate, the gifts must be scaled back so their combined value does not exceed the value transferred.
• The order in which gifts are reduced follows the terms of the will or other disposition, or the relevant rule of law that would apply on a distribution of assets.
• These abatement rules feed into the wider rules in the same chapter on how tax exemptions are allocated among gifts.