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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Structure of the charge: what is property?

The word ‘property’ for inheritance tax purposes includes all types of asset, cash, stocks and shares etc as well as land and buildings. It is defined as including all rights and interests of any description, IHTA84/S272, but we regard this as only including rights and interests (IHTM04470) that are legally enforceable.

It does not extend to a mere hope or right that is not legally enforceable.

In Scotland, legal rights (IHTM12221) are property within the meaning of IHTA84/S272. This is in contrast to the right of election (IHTM12227) of a beneficiary who dies before electing between legal rights and testamentary provisions in the estate of a predeceasing ancestor, spouse or civil partner (IHTM11032), which is not.

You must consider the definition of property at the moment of each charge to tax. Something that was merely a hope at one death (and so not property), may subsequently become legally enforceable and therefore property at a later occasion of charge.

Property that a person has the right to purchase is not regarded as part of their estate,for example, where under a company’s Articles of Association they have a right to purchase shares held by other members. In such a case they are not beneficially entitled to the property and do not have a general power to dispose of the property until they acquire it by paying the purchase price. Until then the owner of the property is the only person who can dispose of it.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

However, a right itself may be of value (IHTM04470) and form part of the estate of the person entitled to it. A deliberate omission to exercise the right may be treated as a disposition.