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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Settled property: purchase of a reversionary interest by a charity between April 1976 and April 1978 (anti-avoidance)

When a reversionary interest (IHTM16231) in settled property (IHTM16000) was purchased by a charity (IHTM11112) between 16 April 1976 and 11 April 1978 (both dates inclusive), charity exemption under IHTA84/S23 does not apply in relation to the non-relevant settled property when it becomes the property of the charity on the termination of the prior interest. (IHTA84/S56 (2) and IHTA84/S56 (7))

Example

Property is put into trust for Leroy for life with remainder to Rosie absolutely. In 1977 Rosie sells her reversionary interest to a charity.

The settled property is not exempt under IHTA84/S23 when Leroy’s life interest comes to an end.

 

You should note that exemption is excluded by IHTA84/S56 (2) and IHTA84/S56 (7) only when the charity purchases the reversion. Exemption is available when the acquisition of the reversion (whenever acquired) is not for monetary consideration. This is the case

  • whatever the date of death of the reversioner, and whether or not the reversion was chargeable to Estate Duty, Capital Transfer Tax or IHT in their estate, and
  • (if it was so chargeable) whether or not the duty or tax had been paid at the time when the prior interest terminated. In particular, you should not restrict exemption on the grounds that part of the settled property was applicable in payment of duty or tax in the reversioner’s estate.