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HMRC internal manual

Inheritance Tax Manual

Termination of interest in possession: deduction of costs

Costs incurred by the trustees of a settlement in connection with a transaction involving the settled property are not within any claim for Inheritance Tax to the extent that such costs are properly payable out of capital.

Accordingly, in the break-up of a fund between life tenant and remainderman, the proportion of the costs attributable to the remainderman’s share is deductible in identifying ‘the value of the property in which (the) interest subsisted’ ( the taxable value)

Costs that are incurred by a beneficiary and borne by them are not deductible.