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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Proper liferents (Scotland): IHT position

The FA80/S93 brought proper liferents into line with the settled property regime of the FA75/SCH5 by:

  • extending the definition of ‘reversionary interest’ in IHTA84/S51 (1) to include in Scotland ‘an interest in the fee of property subject to a proper liferent’ ,and
  • adding at the end of FA75/SCH5 Para 1 (4) a subparagraph (c) so that in Scotland ‘settlement’ included any deed creating or reserving a proper liferent of any property whether heritable or moveable, the property subject to the liferent being treated as the property comprised in the settlement.

Subpara 1(9) of SCH5 was extended to include the interest of an assignee under an assignation of an interest of any kind (other than a reversionary interest) in the property subject to a proper liferent.

A provision was added by subsection (3) to the FA78/S68 (4) so that in its application to Scotland property subject to a proper liferent was deemed to be held in trust for the liferenter.

The provisions of the FA80 apply to any transfer of value made after 17 April 1980 or, where payment of tax has not been made and accepted in full satisfaction of the liability, to any transfer of value made on or before that date if the person liable for the tax on the transfer so elects.

For IHT purposes the proper liferent legislation is now found at IHTA84/S43 (4), IHTA84/S46 and IHTA84/S47.