Pensions: IHT charges: gifts with reservation and statement of practice 10/86
The Inland Revenue (as it was then) issued Statement of Practice 10/86 in 1986. It reads
‘Death benefits under superannuation arrangements
The Board confirm that their previous practice of not charging capital transfer tax on death benefits that are payable from tax approved occupational and retirement annuity schemes under discretionary trusts also applies to Inheritance Tax
The practice extends to tax under the gift with reservation rules as well as to tax under the ordinary inheritance rules.’
So, in a UK registered scheme (IHTM17021) where the death benefit is held on discretionary trusts under the scheme rules, this will not be a gift with reservation (IHTM14025) where:
- the deceased or
- the deceased’s estate or
- the deceased’s personal representatives (IHTM05012)
are potential beneficiaries.
In an unregistered scheme, usually an employer-financed retirement benefit scheme (IHTM17027) or a sponsored superannuation scheme (IHTM17039)) this may still be a gift with reservation and the death benefits can be liable to Inheritance Tax on the member’s death (IHTM17074).