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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
, see all updates

2006 IHT changes: IHT and CGT treatment from 22 March 2006: settlements and death of person with actual or deemed interest in possession

These are all cases where a person with an actual IIP, or a deemed IIP for IHT dies.

Cases where property remains settled for IHT purposes within same settlement.

| Type of trust for IHT immediately before death | Chargeable transfer for IHT? | Disposal for CGT? | Can Holdover Relief be claimed? | || | Pre 200306 IIP Trust: with new IIP
for spouse or civil partner of the
previous income beneficiary which is
a TSI. | No
IHTA84/S18
exemption | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165
possible | | Pre-200306 IIP Trust: other cases | Yes | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S260(2)(a) | | TSI: with new interest in possession
for spouse or civil partner of the
previous income beneficiary where
property includes rights under life
policy and s.49E IHTA (CG36542
applies) | No | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165 | | TSI: with new IIP for spouse or civil
partner of the previous income
beneficiary which is a TSI | No
IHTA84/S18
exemption | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165) | | TSI: other cases | Yes. | TCGA92/72 applies;
death uplift liability only
if TCGA92/S74 applies | S260(2)(a) | | Disabled Actual or Deemed IIP Trust
with new interest in possession for
spouse or civil partner of the
previous income beneficiary | Yes unless
new IIP is
Disabled Trust
or TSI | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S260(2)(a) | | Disabled Actual or Deemed IIP | Yes. | TCGA92/72 applies;
death uplift liability only
if TCGA92/S74 applies | S260(2)(a) | | Deemed IIP: not otherwise covered
with new interest in possession for
spouse or civil partner of the
previous income beneficiary | No if new
interest is TSI
otherwise yes. | No effect |   | | Deemed IIP: other cases | Yes. | No effect |   | | Scottish proper liferent or N.Irish
legal interest for life. | Treatment
depends on
status for IHT. | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165
possible | | Disabled Trust: with new interest in
possession for spouse or civil partner
of the disabled beneficiary | Yes unless
new IIP is TSI | No effect |   | | Disabled Trust any other situation | Yes. Added to
deceased’s
estate | No effect |   | | Bereaved Minor Trust: death of
relevant beneficiary | No | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165
possible | | 18-25 Trust death of relevant
beneficiary under 18 with IIP | No
IHTA84/S71E
(2)(b) | TCGA92/72 applies
death uplift; liability
only if TCGA92/S74
applies | S165
possible | | 18-25: other cases | Chargeable
under S71E | No effect |   | | Relevant Property Trust settlor etc
interest settlor dies | Chargeable
under gifts
with
reservation
rules | No effect |   | | Relevant Property Trust any other
case with actual IIP | No | No effect |   |

*Note that TCGA92/S165 is only available for certain assets.

For types of case see CG36541.

As a general proposition where the next interest treated as an IIP for IHT whether Actualor Deemed is held by the spouse or civil partner of the deceased, the spouse exemptiononly applies where the new IIP is a TSI.