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HMRC internal manual

Inheritance Tax Manual

Reverter to settlor: introduction

Where a qualifying interest in possession (IIP) in settled property (IHTM16062) comes to an end on a death (IHTM04082) and on that event the property reverts to the settlor, IHTA84/S54 (1) provides that the property is left out of account in determining the value of the deceased’s estate.

Where a person becomes beneficially entitled to an IIP on or after 22 March 2006, S54 (1) applies only where the interest is a disabled person’s interest or a transitional serial interest (IHTA84/S54 (2A)).

Similar relief is provided by IHTA84/S53 (3) where such an interest comes to an end during a person’s lifetime (IHTM04083) by excluding the charge under IHTA84/S52.

The conditions for the relief are very clear and simple, but they must be fulfilled precisely. There are limitations (IHTM04352) to the relief and some statutory restrictions. (IHTM04353)