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HMRC internal manual

Inheritance Tax Manual

Armed forces on active service: Estate Duty exemption and settled property

Exemption for death on active service may be available following the death of a civilian for settled property (IHTM16000) which can be exempted from Inheritance Tax (IHT) as a result of the Estate Duty surviving spouse exemption. This is where the IHT charge arises on the termination of an interest in possession (IHTM16091) in settled property where the person whose interest terminates, is the surviving spouse of a person on whose death the Estate Duty exemption applied. Estate Duty that was not paid because of the exemption for death on active service is treated as ‘paid’ for the purposes of the settled property exemption under IHTA84/Sch6/Para2. Further details are given at IHTM16150.

Under Extra Statutory Concession F13 an interest in possession in settled property which terminates on death is exempt where

  • a person died before 12 March 1952,
  • whose estate was wholly exempted from Estate Duty as the property of a common seaman, marine or soldier who died in service of the Crown, and
  • under whose Will a person who dies on or after 13 March 1975 has a limited interest in possession.

Where all these conditions are satisfied, IHT is not charged on any property exempted on the original death which passes under the terms of that person’s Will, on the termination of the limited interest on the later death. Although this concession remains on foot, it is unlikely that any persons who might qualify still survive.