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HMRC internal manual

Capital Gains Manual

Absolute entitlement: life interest released in favour of remaindermen

Section 71(1) applies where a life tenant releases his or her interest in favour of any remaindermen who then becomes entitled to an absolute interest as against the trustee. The release of a life interest gives rise to a possible Inheritance Tax liability if the life tenant should die within seven years of the release, and the trustee may retain sufficient funds for to cover any such liability. Notwithstanding this retention by the trustees, the Capital Gains Tax charge should cover the whole of the chargeable asset released by the life tenant.