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The mechanism of the charge on lifetime gifts is complicated. This is partly because of the history of IHT (see Divisions I1.3 and I1.4) and partly to prevent tax avoidance. It also includes three different types of exclusion from charge, as follows:

1. Ìý

   •ÌýÌýÌýÌý exempt transfers — this includes gifts between spouses and to charities, certain exemptions for small gifts, and above all 'potential exemption', ie exemption for any transfer made to another individual (which becomes exempt if the transferor survives it by seven years (see I3.311–I3.318A)).

2. Ìý

   Sometimes a transfer of value may be exempt only to a limited extent, such as a gift to a spouse not domiciled in the UK¹ (I4.227), or a gift in excess of the annual exemption² (I3.322), in which case if all the value transferred by it is within the limit it is an exempt transfer

3. Ìý

   •ÌýÌýÌýÌý certain statutory exemptions