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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Lifetime transfers: gifts with reservation (GWRs): the reservation on insurance policies: special rule for policies with linked benefits

The special rule (at FA86/SCH20/para7) applies only where the benefits of the donee and of the donor and/or the donor’s spouse or civil partner (IHTM11032) are linked under the terms of the insurance contract(s).

Its purpose is to ensure that the gifted Term Assurance Policy is treated as part of the donor’s death estate. The rule provides that a gift is to be treated as not to the donor’s entire exclusion if:

  • it is made on or after 18 March 1986 (IHTM14431)
  • the gift consists of or includes, or is made in connection with, an insurance policy on the life of the donor or his spouse or civil partner or on their joint lives
  • the benefits which will or may accrue to the donee as a result of the gift vary by reference to the benefits accruing to the donor or his spouse or civil partner (or both of them) under this policy or under another policy (whether issued before, or at the same time, or afterwards).

For this purpose, the reference to a policy on the joint lives of the donor and spouse or civil partner includes a reference to a policy on their joint lives and life of survivor. And, the reference to benefits accruing to the donor or spouse or civil partner (or both of them) includes a reference to benefits which accrue by virtue of the exercise of rights conferred on either or both of them.