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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Interests in possession: addition of settled property or value: additions of value after 22 March 2006


  • there is an addition of value to a settled fund on or after 22 March 2006, and
  • the underlying interest in possession has subsisted since before 22 March 2006,

this will not result in any of the settled property becoming relevant property, provided that the addition really is one solely of value and is not an addition of property.

This is because:

  • under IHTA84/S43(2) there needs to be a disposition of property to create a settlement, and
  • an addition of value does not result from a disposition of property,
  • also, the increase in value derives from, or represents the property, that was settled before 22 March 2006.

So there is no new settled property underlying an interest in possession to which a person had become entitled on or after 22 March 2006, IHTA84/S49(1A).

In the case of the examples of added value at IHTM16074, one of which resulted from capital growth, the other from the vesting of the reversion in possession on the termination of the prior life interest, neither would give rise relevant property. And the same would apply if the trustees became entitled to vacant possession of a building on the expiry of a lease or tenancy.

In none of these examples was there a disposition. And no new settled property, underlying an interest in possession to which a person had become entitled on or after 22 March 2006, had come into existence. So none of these would give rise to any relevant property.

However the position would be different if Simon had assigned a reversionary life interest.


John settled property on Anne for life, followed by Simon for life and then for Stephen absolutely. Simon settles his reversionary life interest on trust for Lesley for life in 2000. Lesley has a qualifying interest in possession in Simon’s interest under John’s settlement. Anne dies in 2009, so Lesley becomes entitled to an interest in possession in John’s trust during Simon’s life - a pur autre vie interest (IHTM16260). This is not an immediate post-death interest, or a transitional serial interest (IHTM16061). It is not a qualifying interest in possession and so the property in John’s trust is now relevant property.

Whether an addition really is solely of value is considered at IHTM16078.