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HMRC internal manual

Inheritance Tax Manual

Life Policies: policy on the deceased’s life not connected with any other transaction (except a trust): policy effected by the deceased for their own benefit but gifted later: special rule: modification of the special rule for unit-linked policie

For unit-linked policies (IHTM20106), IHTA84/S167 (4) provides for a reduction of the artificial value if the value of the units at the date of transfer is less than their value at the date they were allocated.


Alan takes out a unit-linked policy and pays premiums of £1,000 per year for fifteen years. Alan then gives the policy to Bianca.

At the date of transfer the value of the units is £9,000. At the date of allocation the value of the units was £12,000.

So the artificial value is reduced by £3,000 (from £15,000 to £12,000).