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HMRC internal manual

Inheritance Tax Manual

Reversions: treatment for IHT

As a general rule, reversionary interests are ‘excluded property’ and thus free from IHT under IHTA84/S48 (1).

This reflects the inheritance tax position that all the value held in a settled fund is attached to the interest in possession by IHTA84/S49 (1).

However, it should not be assumed that all reversions are excluded property for IHT purposes.

You must satisfy yourself, by checking the head file or the documents, or by asking the taxpayer for details, that the reversion qualifies as excluded property.

A reversion is not excluded property if -

  • it has at any time been acquired for a consideration in money or money’s worth, whether by the person now entitled to it or by someone previously entitled to it
  • it is a reversion to which the settlor or his spouse or civil partner (IHTM11032) is or has been beneficially entitled
  • it is the interest expectant on a lease for life (IHTM16191).

These exceptions exist to counter the use of reversions in tax planning.