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HMRC internal manual

Inheritance Tax Manual

Discounted Gift Schemes: where the transferor’s life was uninsurable at the transfer date

The Technical Note issued by HMRC on 1 May 2007 (IHTM20650) set out our longstanding view that the open market value of the rights retained by the settlor would be nominal worthless where the settlor’s life was uninsurable at the transfer date, whether due to their age, their state of health, or a combination of the two. In such circumstances the value transferred will broadly be the equal to the sum invested

This view was tested in the High Court in the case of HMRC v Bower & Ors [2008] EWHC 3105 (Ch) - reported at (2009) STC 510. The High Court decision in that case found in favour of HMRC, confirming that the basis on which HMRC values the retained rights where the settlor’s life is uninsurable at the transfer date is correct