Section 21 Normal expenditure out of income.
United Kingdom
A transfer of value is an exempt transfer if, or to the extent that, it is shown—
that it was made as part of the normal expenditure of the transferor, and
that (taking one year with another) it was made out of his income, and
that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living.
A payment of a premium on a policy of insurance on the transferor’s life, or a gift of money or money’s worth applied, directly or indirectly, in payment of such a premium, shall not for the purposes of this section be regarded as part of his normal expenditure if, when the insurance was made or at any earlier or later time, an annuity was purchased on his life, unless it is shown that—
the purchase of the annuity, and
the making or any variation of the insurance or of any prior insurance for which the first-mentioned insurance was directly or indirectly substituted,
were not associated operations.
Subsection (3) above shall not apply to annuities purchased before 13th November 1974.
Section 3(4) above shall not apply for the purposes of this section.
Annotations
Textual amendments
- F1
Words in s. 21(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 395(a) (with Sch. 2)
- F2
Words in s. 21(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 395(b) (with Sch. 2)
Notes on the whole Act
Textual amendments
- F1
By Finance Act 1986 s. 100(1), on and after 25 July 1986 the Capital Transfer Tax Act 1984 may be cited as the Inheritance Tax Act 1984.