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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Rights of residence: introduction

If someone has a right to reside in a property under the terms of a trust, he or she will often have an interest in possession in that property (IHTM16132 +). This has a number of effects for IHT:

  1. The death of the beneficiary occupying the property gives rise to a claim to IHT under IHTA84/S4 with IHTA84/S49 (1). Where the person becomes beneficially entitled to the interest in possession on or after 22 March 2006, S49(1) will only apply if it is an immediate post-death interest, a disabled person’s interest or a transitional serial interest, S49(1A)
  2. If the beneficiary ceases to reside in the property in his or her lifetime:

 

  1. a claim to IHT arises under IHTA84/S52 (1). Where the person becomes beneficially entitled to the interest in possession on or after 22 March 2006, S52(1) will only apply if it is an immediate post-death interest, a disabled person’s interest or a transitional serial interest, S52(2A); and
  2. the trusts governing the property after the beneficiary ceases to live there will be either -
  • in favour of an individual, a disabled person’s interest (IHTM42805) or a transitional serial interest (IHTM16061) - giving rise to a potentially exempt transfer (IHTM04057) by the beneficiary, or
  • in favour of non-interest in possession or non-qualifying interest in possession trusts (IHTM16062) - giving rise to an immediately chargeable (IHTM04067) transfer by the beneficiary as deemed transferor.