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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Pensions: alternatively secured pensions: IHT treatment for deaths between 6 April 2006 and 5 April 2007

The left over ASP funds on the death of a scheme member are treated as follows, for the purposes of Inheritance Tax (IHT).

  • An immediate IHT charge is imposed on the scheme member’s estate where the funds are paid as a transfer lump sum death benefit (IHTM17351) That is where they remain in the scheme for the benefit of other scheme members (which could include other family members) or are refunded to an employer or paid to a dependant who is not a financial dependant or surviving spouse or civil partner, IHTA84/S151A (IHTM17355).
  • There is also an IHT charge if the funds are used to provide dependant’s benefits or paid as a charity lump sum death benefit but these are not paid within 6 months of the end of the month when the scheme member died
  • There can be an IHT charge if an unauthorised payment is made (although this is unlikely before 6 April 2007).
  • There is a deferred IHT charge where the funds are expended on pension benefits, through income withdrawal, for a relevant dependant. Here the charge is limited to any funds that are left when the dependant dies or, if earlier, when the dependant’s pension ceases or the dependant ceases to be a relevant dependant, IHTA84/S151B, (IHTM17356).
  • Where a dependant, who is within the pension scheme definition at IHTM17354:

    • uses the pension pot from a scheme member who died before age 75 to support an income withdrawal pension, and
    • took the decision at age 75 (or because they were over 75 when the member died) to opt for an ASP,

the IHT charge is imposed on the left over funds on the dependant’s estate on their death IHTA84/S151C (IHTM17357).

Technical will advise on claims to IHT arising on ASP funds.