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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Lifetime transfers: specific lifetime reliefs: interests in land: other property

Where the transferred asset appears to be entitled to relief but it is neither shares nor an interest in land, you may still have to make an adjustment under IHTA84/S139.

If the asset is not in all respects the same at the death or sale as at the time of the chargeable transfer you will need to make an adjustment to the market value (IHTM14626) on death or sale.

The adjustment required depends on whether the change to the asset has increased or decreased its market value between the date of transfer and the date of death or sale

  • if the change has decreased the value, the market value at the death or sale is increased by the difference between the market value at the time of the chargeable transfer and what that value would have been if the change had occurred before the transfer - IHTA84/S139(1)
  • if the change has increased the value, the market value at the death or sale is reduced to what it would have been had the change not occurred - IHTA84/S139(3).

The instruction above does not apply where any benefits are derived from the transferred asset between the time of the transfer and the date of death or sale, and those benefits exceed a reasonable rate of return on the market value at the time of the chargeable transfer. In these circumstances neither IHTA84/S139(1) or (3) apply, butinstead IHTA84/S139(4) applies to

  • increase the market value at the date of death or sale by the excess of the benefits over the reasonable return.

This will apply, for example, where the transferred property is a short-term purchased annuity, where the benefits received are a combination of a return on the amount invested and also a return of the original capital