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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Value left out of account: introduction

These provisions do not take property (IHTM04030) outside the charge to IHT; instead the value of the property is left out of account or disregarded in certain circumstances. The impact of this distinction is that the property is not‘exempt’ from the charge and remains part of the individual’s estate. It can thus affect the value of other property (or part of the same property) which is within the tax charge.

Example

The deceased dies owning a ½ share of their house absolutely, and is entitled to an interest in possession (IIP) (IHTM16000) in a trust that owns the other ½ share and qualifies for Estate Duty surviving spouse exemption (IHTM04341). As the deceased is beneficially entitled (IHTM04031) to whole property, you should value the entirety of the house, bring an arithmetic ½ share into charge in the deceased’s Free Estate but leave the value of the ½ share in trust out of account.