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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Pensions: treatment of alternatively secured pensions from 6 April 2007: consequences for Inheritance Tax position

The main consequences of these changes are

  • the UP charge will impact on the IHT charge arising under IHT84/S151 A-C (IHTM17352); that impact will depend on whether the UP charge or the IHT charge is levied first (IHTM17403)
  • the ASP fund is still treated as forming part of the deceased’s estate on death but these assets are now brought into charge for all three occasions of charge as the highest part of the value transferred on death. Accordingly, the charge is a top slice charge
  • where there is an UP charge and an IHT charge on the ASP funds the aggregate of the two tax charges is the same in which ever order the two taxes are charged. But a special IHT provision is made to cater for cases where a person with an ASP dies leaving property chargeable to Inheritance Tax, net of their ASP, that is worth less than the IHT nil rate band. This will apply where the IHT charge arises before any UP charge and provides for the amount of any unused IHT nil rate band to be grossed up. The ASP funds will be charged to Inheritance Tax on the excess over the ‘grossed up nil rate band’ IHTM17407. This approach recognises that the gross ASP funds will be subject to subsequent UP charges of up to 70%.
  • as before an estate containing an ASP cannot qualify as an excepted estate (IHTM17375)