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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Life Policies: Pure Endowment policy linked with a Term Assurance policy: Discounted Gift Schemes: quantifying the Inheritance Tax claim

Quantifying the value transferred is the responsibility of the Actuarial Team. The value transferred is determined by the loss to the transferor’s estate (IHTM04054) in accordance with IHTA84/S3 (1). This is the difference between the total amount invested by the transferor and the open market value (IHTM09703) of the rights retained by the settlor under the arrangement.

Before the transaction was entered into the settlor’s estate included the sum that they subsequently invested. Afterwards they owned the retained rights, that is the withdrawals or the series of maturing single premium policies. The open market value of the retained rights is determined in accordance with IHTA84/S160, that is, what they would fetch if sold in the open market in a transaction between a willing seller and a willing buyer.