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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Reversionary interests: lease for life

Under general law a lease (IHTM23000) of property (IHTM04030) does not by itself amount to a settlement (IHTM16000) of that property. Accordingly, an interest expectanton the determination of a lease is normally not a reversionary interest (IHTM16000) for IHT purposes even though it may sometimes be described as a ‘freehold reversion’ or ‘reversionary lease’.

However, certain types of leases, for example, a lease for someone’s life, (IHTM16000) or a lease determinable on or by reference to someone’s death, are in certain circumstances treated as settlements for inheritance tax purposes, IHTA84/S43 (3). An interest expectant on the determination of a lease which is treated as a settlement is therefore a reversionary interest for those purposes.

But although the lease is treated as a settlement, the reversionary interest is not excluded property, (IHTM04251) IHTA84/S48 (1)(c). But this does not stop it being outside the tax charge for some other reason, for example, under IHTA84/S6 (1).