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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Reverter to settlor: statutory restrictions on relief

The relief provisions do not apply where

  • the settlor (IHTM16000) had acquired a reversionary interest (IHTM16000) in the settled property for a consideration in money or money’s worth, IHTA84/S53 (5)(a) and IHTA84/S54 (3) or
  • their application depends upon a reversionary interest having been transferred into settlement on or after 10 March 1981, IHTA84/S53 (5)(b) and IHTA84/S 54 (3).The first restriction is extended by IHTA84/S53 (6) and IHTA84/S 54 (3) which provides that a person is

‘….. treated as acquiring an interest for a consideration in money or money’s worth if he acquires it as a result of transactions which include a disposition (IHTM04023) for such consideration (whether to him or another) of that interest or of other property.’This would apply, for example, if it were acquired by a close company in which he was a participator or by trustees of a settlement in which he had an interest in possession. (IIP) (


However, both IHTA84/S53 (5)(a) and 53 (6) are limited by IHTA847/S53 (7) and (8) where the reversion was acquired before 12 April 1978.

The second restriction was added in 1981 to counter the abuse illustrated below.


Property was settled on A for life with remainder to B absolutely. B settled his reversionary interest on A for life with remainder to himself; A’s life interest under the original settlement was then terminated.

No claim arose when B settled his reversion (because it was excluded property ). (IHTM04251) Nor did any claim arise when A’s original life interest was terminated (because A then had another IIP in the property).

But for IHTA84/S53 (5), the relief provisions would have operated to allow a tax free transfer of the property from A to B when A’s interest under the later settlement also terminated.