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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Settled property: other valuation issues when an interest in possession ceases

Partial termination of an interest in possession (IIP) (IHTM 16000)

The new approach described in IHTM04093 only covers those situations where the entire IIP comes to an end, and not to those where only a partial termination occurs, when the rules in IHTA84/S52 (4) apply. Under these you must first value the property (or part) in which the whole interest subsisted and then take an arithmetical share of that value (depending on the proportion of the interest which comes to an end) as the value transferred. But the settled property is still not aggregated with any other property in the life tenant’s estate.

The point may be of practical importance, for instance, where the settled property includes land or a holding of shares in an unquoted company. In such cases, requests for valuation by the Valuation Office or by SAV should be framed accordingly.

The related property provisions (IHTM09731) cannot apply to affect the value of the settled property. Property in which the qualifying IIP subsists is valued without reference to other property in the life tenant’s or their spouse’s or civil partners (IHTM11032) estate.

Business and agricultural relief and instalments

Although under the new view of the law we can only value the settled property in isolation, the level of business (IHTM25000) or agricultural (IHTM24000) relief, where appropriate, is still to be determined by reference to that property and any other property held.


The transferor owns 40% of Z Ltd absolutely and has a life interest in a further 20%. You should determine the rate of relief by reference to a 60% holding and not the 20% holding. (This is of greater relevance to disposals of settled property before 6 April 1996.)

The same principle applies to the facility to pay tax by instalments (IHTM30191).