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HMRC internal manual

Inheritance Tax Manual

Value left out of account: introduction

These provisions do not take property (IHTM04030) outside the charge to Inheritance Tax (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. So it can affect the value of other property (or part of the same property) which is within the tax charge.

Example

Alexander dies owning a one-half share of his house absolutely, and is entitled to a qualifying interest in possession (IIP) (IHTM16062) in a trust that owns the other one-half share and qualifies for Estate Duty surviving spouse exemption (IHTM04341). Alexander is beneficially entitled (IHTM04031) to the whole house, so you should value the entirety of the house. You must then include an arithmetic one-half share in his chargeble Free Estate but leave the value of the one-half share in trust out of account.