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HMRC internal manual

Inheritance Tax Manual

Pensions: a treatment of alternatively secured pensions from 6 April 2007: example where UP charge paid first on part of ASP funds

The scheme member dies and leaves an estate of £270,000. The IHT nil rate band (NRB) is £300,000 and the value of the funds in their ASP is £200,000. Before the IHT on the death estate becomes due, one half of the funds in the ASP has been paid out and has attracted an UP charge of 70%. You will need to do two separate calculations.

First, the net value of the ASP funds paid out should be calculated - this will be £100,000 - £70,000 = £30,000. IHT can then be charged in a normal top slice calculation as shown at IHTM17409. Here, when the net value of the ASP funds are added to the estate on death, the chargeable estate becomes £300,000, so no IHT is payable.

Second, the balance of the ASP funds not paid out must be charged to tax. There is no unused NRB anymore, so the £100,000 is brought into charge again as a normal top slice charge.

On COMPASS you will need to:

  • add a new entry to the case record,
  • select the ‘stats’ title ‘ASP fund chargeable from 6 April 2007’
  • include the value of the ASP at £100,000
  • include the value of the remainder of the estate, plus the net value of the ASP funds paid out (£300,000) in the ‘Aggregate chargeable estate’ box

This will give rise to a charge on the ASP funds of £40,000.