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HMRC internal manual

Inheritance Tax Manual

Dispositions for maintenance of the transferor's family: dispositions satisfying IHTA84/S11 in part

If a disposition (IHTM04023) satisfies the conditions of IHTA84/S11 (1) - (4) to only a limited extent, you should treat it as comprising two separate dispositions. The part which satisfies the conditions of S11 (1) - (4) is a disposition which is not a transfer of value (IHTM04024). The other part is a separate disposition which is a transfer of value and so may be chargeable.

You need to apply this provision with care because, as a general rule, a disposition which confers interests other than pure maintenance provisions is not within IHTA84/S11 at all. An apportionment under IHTA84/S11 (5) is appropriate only where the disposition of an identifiable part of the asset transferred completely satisfies IHTA84/S11.

Example 1

By one instrument Anthony transfers £100,000 to trustees to hold

  • £20,000 on trusts wholly within IHTA84/S11, and
  • the residue on trusts outside the section.

The sum of £20,000 is treated by IHTA84/S11 (5) as a separate disposition within IHTA84/S11.

However, in accordance with the general rule given above, IHTA84/S11 does not apply to any disposition by way of settlement under which the capital will at some time be transferred absolutely and unconditionally to some individual other than for their maintenance.

Example 2

Susan creates a trust to pay

  • the income to her daughter Alice until she attains the age of 18 for her maintenance, then
  • the income to Alice until the age of 30, and then
  • the capital to Alice absolutely.

The terms of the trusts after Alice reaches 18 fail to meet the conditions of IHTA84/S11 and no part of the dispositions will qualify for relief.

Refer to Technical any settlement

  • in favour of a disabled child who is a dependent relative of the settlor which is
  • for the benefit of the child throughout their life.