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HMRC internal manual

Inheritance Tax Manual

Rights of residence: has someone ceased to occupy his or her main residence?

Has someone ceased to occupy his or her main residence and, if so, was this to be tested by intention or by physical fact?

(Where the person became beneficially entitled to the interest in possession, on or after 22 March 2006, this will only be relevant (IHTM16131) if it is an immediate post-death interest, a disabled person’s interest or a transitional serial interest (IHTM16061)).

For example a person with a right of occupation ‘so long as he shall desire’ is on holiday and becomes seriously ill. He loses his mental capacity to make a decision and dies a month later. Does his interest in possession continue until his death?

This can give rise to practical problems, which you will need to consider when establishing what the Inheritance Tax claim is, because if the interest has ceased in lifetime a claim under IHTA84/S52 (1) will often be covered by the nil-rate band, thus throwing the entire burden of tax onto the free estate (as in the Watkins case).

If the person inheriting the house is different from the person taking under the occupant’s will, there is clearly a conflict of interest and inter-family disputes can arise.

If the tax at stake warrants an investigation into this point and there is doubt as to when the interest in possession ceased after you have obtained the background facts, you should refer to Technical Group for advice.