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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Termination of interest in possession: the effect of terminating the interest

If the interest has vested in possession, the beneficiary may enjoy it for many years, or - quite commonly - it may be brought to an end while the beneficiary is enjoying it.

The effect of bringing the beneficiary’s interest to an end is that the individual in question ceases to have an interest in possession, and a claim to inheritance tax under IHTA84/S52 (1) (IHTM04084) will normally arise if:

  • the beneficiary became beneficially entitled to the interest in possession before 22 March 2006, or
  • the beneficiary became beneficially entitled to the interest in possession on or after 22 March 2006 and it is an immediate post-death interest , a disabled person’s interest or a transitional serial interest

The beneficiary will be deemed the transferor.

IHTA84/S53(1A) provides that all tax shall not be chargeable under IHTA84/S52 if

  • the person whose interest comes to an end became beneficially entitled to it before 22 March 2006,
  • the interest comes to an end on or after that date, and
  • immediately before it comes to an end, S71A (trusts for bereaved minors) or S71D (age 18-to-25 trusts) applies to the property in which the interest subsists.