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HMRC internal manual

Inheritance Tax Manual

Structure of the charge: main charging provisions

The legislation contains a number of terms that appear throughout the charging provisions. These terms are fundamental to the structure of the charge and it is important that you understand their meaning and how they fit together.

There are three core provisions that impose the charge on lifetime transfers. Inheritance Tax is charged on

  • the value transferred (IHTM04028) by a chargeable transfer, (IHTM04027) IHTA84/S1
  • a chargeable transfer is a transfer of value (IHTM04024) made by an individual which is not an exempt transfer, (IHTM04026) IHTA84/S2 (1), and
  • a transfer of value is a disposition (IHTM04023) by a person as a result of which the value of his estate (IHTM04029) immediately after the disposition is less than it would be but for the disposition, IHTA84/S3 (1).

The process through which a disposition becomes a chargeable transfer is shown on the next page IHTM04022.

To bring the charges on death and on settled property in which a qualifying interest in possession (IHTM16062) subsists within this structure, IHTA84/S4 (1) and IHTA84/S52 (1) say that these events are to treated as if a transfer of value had been made, so deeming the events to be a transfer of value. The distinction between an actual transfer of value and a deemed transfer of value (IHTM04025) is important.

Gifts with reservation (IHTM14301) are charged by being treated as property to which the deceased was beneficially entitled (IHTM04031) and forming part of their estate on death, FA86/S102 (3).

The legislation also specifically excludes (IHTM04141) certain property from charge.