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HMRC internal manual

Inheritance Tax Manual

Settled property to which the settlor's spouse, civil partner, widow(er) or surviving civil partner is entitled

Where a qualifying interest in possession (IHTM16062) in settled property comes to an end on the life tenant’s death (IHTM04082) and on that event the settlor’s spouse or civil partner (IHTM11032) becomes beneficially entitled to the settled property, under IHTA84/S54 (2) the property is left out of account in determining the value of the life tenant’s estate, provided that spouse or civil partner is domiciled in the UK.

Where a person becomes beneficially entitled to an interest in possession on or after 22 March 2006, S54 (2) only applies if it is a disabled person’s interest, or a transitional serial interest, S54 (2A).

Similar relief is provided by IHTA84/S53 (4) where such an interest comes to an end other than on death (IHTM04083) by excluding the charge under IHTA84/S52.

The relief is extended to cover property to which the widow, widower or surviving civil partner of the settlor becomes beneficially entitled when the interest in possession comes to an end if the settlor died within the two years before the interest came to an end.

Under IHTA84/S54 (2B) the value of settled property is to be left out of account on the death of a life tenant who, on or after 22 March 2006, became beneficially entitled to an interest in possession in the property where:

  • the life tenant’s interest was an immediate post-death interest throughout;
  • The settlor had dies less than two years before the life tenant’s death, and
  • On the life tenant’s death, the settlor’s widow(er) or surviving civil partner becomes beneficially entitled to the property and is domiciled in the UK.

The limitations and restrictions contained at IHTM04352and IHTM04353 apply equally to these provisions.