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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating form IHT419: definition of 'property derived from the deceased' for FA86/S103 purposes

The term ‘property derived from the deceased’ includes any property which was the subject of a disposition made by the deceased, either alone or together with others, whether directly or by one or more intermediate transactions, FA86/S103 (3).

In practice, income from property given absolutely by the deceased is treated as falling outside this definition. But where the deceased settled the property, the definition includes income payable under the disposition.

You should treat money raised by the sale or mortgage of property derived from the deceased as though it was property derived from the deceased.


  • Alex transfers Rose Cottage to his wife, Belinda.
  • Belinda mortgages the property and passes the proceeds to their child, Charlotte.
  • Charlotte loans her father, Alex, £50,000 (this being part of the proceeds).
  • Alex dies owing Charlotte £50,000.