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HMRC internal manual

Inheritance Tax Manual

Settled property: disclaimers

Where a person becomes entitled to an interest in settled property but disclaims it, then, provided that the disclaimer is not made for consideration in money or money’s worth, the Inheritance Tax Act 1984 is to apply as if he had not become entitled to such an interest, IHTA84/S93.

S93 applies to interests under lifetime settlements, wills or intestacies.

There is no time limit within which the person may disclaim. This is a necessary provision because the person taking the (unwanted) benefit might do so as a result of an unexpected contingency, and many years after the trusts began.

A disclaimer need not be made in writing. Disclaimer by action is possible although, apart from writing, an oral message to the trustees might be more common.

Disclaimer cannot be made if the interest has been accepted, i.e. if any benefit has been taken under it. However, where an interest in possession has vested the beneficiary can validly disclaim before any benefit has been accepted.

At English law a partial disclaimer is not possible so that the whole of the interest must be disclaimed (this however is subject to the terms of the trust). Under Scots Law there are certain circumstances in which a residuary legatee can make a partial disclaimer. (see Statement of Practice (SP/E18)

Under a true disclaimer, the beneficiary in question falls out of the picture and the trusts of the will or settlement take effect ignoring that beneficiary. It follows that the beneficiary cannot purport to disclaim and redirect the benefit to someone else. Such ‘mixed’ transactions are almost inevitably a matter of some confusion and difficulty; their correct effect can only be judged on all the facts of the particular case.

The interest capable of being disclaimed need not be an interest in possession. It can be a reversionary interest, or a right under a non- - interest in possession settlement. S93 says ‘interest’ and in the case of a NIIP settlement the object has the right to be considered; which is his ‘interest’.