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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 s.11(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. It is considered that an apportionment under IHTA84/S11 (5) is appropriate only where the disposition of an identifiable part of the property transferred completely satisfies IHTA84/S11.

Example 1

By one instrument property is transferred to trustees to hold

  • a specified amount on trusts wholly within IHTA84/S11, and
  • the residue on trusts outside the section.To the extent of the specified amount it is treated by IHTA84/S11 (5) as a separate disposition within IHTA84/S11.

Another situation in which IHTA84/S11 (5) may apply is where a settlement on divorce or dissolution of a civil partnership (IHTM11032) confers some benefit other than maintenance within IHTA84/S11, but in this situation you may also need to consider whether the disposition is one not to confer bounty, (IHTM04151), IHTA84/S10.

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 the transferee.

Example 2

A trust is established to pay

  • the income to a child until he attains the age of eighteen for his maintenance, then
  • the income to the child until the age of thirty, and then
  • the capital to the child absolutely.The remainders over fail to meet the conditions of IHTA84/S11 and no part of the dispositions will qualify for relief.

Refer to TG any settlement

  • in favour of a physically or mentally handicapped child who is a dependent relative of the settlor which is
  • for the benefit of the child throughout their life.