IHT Family Maintenance Exemption: s11 IHTA 1984
Maintenance payments for a spouse, children in education, and incapacitated dependent relatives are not transfers of value for IHT — no nil-rate band used, no seven-year clock. Section 11 IHTA 1984 provides a complete exemption for genuine family maintenance.
Who Qualifies for s11 Maintenance Exemption
Spouse or civil partner
Condition: Maintenance for current, separated, or divorced spouse/civil partner
Limit: Must be genuine maintenance — not a capital settlement
Child under 18
Condition: Maintenance, education, or training of a child of the transferor or their spouse/civil partner
Limit: Child must be under 18 or in full-time education
Dependent relative
Condition: Care or maintenance of a relative incapacitated by age or infirmity from maintaining themselves
Limit: Relative must genuinely be unable to maintain themselves
Frequently Asked Questions
What is the s11 IHTA 1984 maintenance exemption?
Section 11 IHTA 1984 provides that certain dispositions are not transfers of value — meaning they are completely outside the IHT system and do not need to be reported or set against any exemption. The dispositions covered are: (1) dispositions to another party to the marriage or civil partnership for their maintenance (s11(1)); (2) dispositions for the maintenance, education, or training of a child of the transferor or their spouse/civil partner, where the child is under 18 or is in full-time education (s11(2)); (3) dispositions for the care or maintenance of a dependent relative of the transferor or their spouse/civil partner, where the relative is incapacitated by old age or infirmity from maintaining themselves (s11(3)).
What counts as 'maintenance' for the purposes of s11?
Maintenance means payments or transfers for the upkeep, care, or education of the recipient — not capital accumulation. Payments that qualify include: regular cash payments for living expenses; school or university fees; nursing home or care costs for an elderly dependent relative; medical expenses; housing costs (e.g. paying rent or a mortgage for the recipient). A lump sum can qualify if it is genuinely for maintenance purposes — for example, paying school fees for several years in advance. However, a gift that goes beyond maintaining the recipient — for example, giving a child a large capital sum that exceeds their living or education costs — is only s11-exempt up to the maintenance element. The excess is treated as a transfer of value and may be a potentially exempt transfer.
Who counts as a 'dependent relative' for s11 purposes?
Under s11(6) IHTA 1984, a dependent relative is a relative of the transferor, or of their spouse or civil partner, who is incapacitated by old age or infirmity from maintaining themselves. 'Relative' for this purpose means a parent, child, brother, sister, grandparent, or other lineal ancestor or descendant. The incapacity must be genuine — a relative who is elderly but can maintain themselves does not qualify. A relative who is mentally or physically disabled and therefore unable to work or look after their financial needs would qualify. Unlike the Inheritance Act 1975 dependant definition, s11 applies only where the relative genuinely cannot maintain themselves due to age or infirmity.
How does s11 differ from the annual exemption and normal expenditure out of income?
The s11 maintenance exemption is broader than some think but narrower than others. Key distinctions: (1) Annual exemption (IHTA 1984 s19): £3,000 per year — applies to any gift, regardless of purpose; (2) Small gifts exemption (s20): £250 per recipient per year — applies to any gift; (3) Normal expenditure out of income (s21): regular gifts out of surplus income — requires a pattern of giving and must not affect the donor's standard of living; (4) s11 maintenance: no annual limit, no income requirement, no 7-year clock — but restricted to maintenance purposes and qualifying family members. The s11 exemption is particularly useful for: school fees paid by grandparents; elderly care costs funded by children; and regular maintenance for a spouse during separation.
Does s11 apply to divorce financial settlements?
Section 11(1) IHTA 1984 specifically covers maintenance of a party to a marriage or civil partnership — but also includes a disposition made 'for the maintenance of a separated or divorced spouse or civil partner' under s11(1)(b). This means that maintenance payments under a court order or separation agreement to a separated or divorced former spouse can qualify as not being a transfer of value for IHT — provided they are genuine maintenance and not capital settlements. A clean break capital lump sum paid on divorce would not be a s11 maintenance payment; it would need to be analysed under the ordinary transfer of value rules (though divorce itself often means both parties' estates are diminished equally, limiting any IHT issue).
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