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HMRC internal manual

Inheritance Tax Manual

Excepted transfers and terminations - where the value transferred on termination of a life interest does not exceed any exemptions that are available.

Where trustees bring to an end the life tenant’s interest in settled property, the life tenant is treated as making a transfer of value (IHTM16091). If the life tenant has not made any chargeable transfers personally, they can give notice to the trustees that the exemptions they are entitled to are available for use against the property in which their life interest is being terminated (IHTM14170). Where the value transferred is covered by the exemptions available, the termination is an excepted termination.

Although such a disposal would normally be an excepted termination under the rules outlined at IHTM06103 and IHTM06104 as well, this is the only excepted transfer or termination to which a statutory clearance applies IHTM06108.