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Where partial consideration is given for a disposition, but the transferor only satisfies their part of the bargain more than a year after the disposition is made - as considered at IHTM14871, you need to calculate the chargeable portion of the payments made. This is done in two stages.

Firstly you measure the element of bounty in the arrangement.

This is the difference between the value of the total payments being made and the value of the property received. This must be valued at the time of the original disposition.

Then you apply this proportion to the payments when they are actually made.

The example below shows how this works in practice.

Example

In 2009 Abdul buys a property from Brian for 拢200,000.

The property is worth 拢100,000.

So Abdul is paying partial consideration for the disposition of the property to him by Brian, satisfying the first condition set out at IHTM14871.

Abdul pays 拢40,000 immediately, with the balance to be paid in five annual instalments of 拢32,000.

So Adbul is not only paying partial consideration, but he is also satisfying his part of the bargain, paying 拢200,000, more than one year after the disposition is made. This satisfies the second condition at IHTM14871.

The discounted value in 2009 of the future instalments that Abdul has agreed to pay is say 拢110,000 but the property is conveyed to Abdul immediately.

Abdul dies in 2013, after paying 拢40,000 in 2009, and 拢32,000 in each of 2010, 2011 and 2012, a total of 拢136,000.

Loss to Abdul calculated in 2009

The total value of the payments being made by Abdul is 拢150,000 (he paid 拢40,000 immediately and the future instalments of 拢32,000 per year for five years are valued, in 2009, at 拢110,000).

Abdul has received property worth 拢100,000.

The element of bounty is therefore calculated as 拢150,000 - 拢100,000 = 拢50,000.

As the element of bounty is 拢50,000 and the value of the payments that Abdul agreed to pay, valued in 2009, was 拢150,000, the chargeable portion of each payment made by Abdul is

50,000 梅 150,000 = one third

This proportion is applied to each payment made by Abdul, as follows:

The initial charge on the payment of 拢40,000 is

One third x 拢40,000 = 拢13,333

Similarly, later charges are on

One third x 拢32,000 = 拢10,666 for each of the three payments of 拢32,000 that Abdul made before his death.