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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Definition and extent of liability: property settled before the death

Where property was settled before the deceased’s death, IHTA84/S200(1)(d) imposes liability on any person for whose benefit the settled property or income from it is applied after the death. For example, a person who receives a benefit from a trust which became discretionary (IHTM16041) on the death of a life tenant (IHTM16121).

Under IHTA84/S204(5), a person liable as a person for whose benefit the settled property or income from it is applied, is liable only to the extent of that property or income. The income applied for the benefit of the person concerned is reckoned as the amount less any income tax borne by them in respect of it. Deduction is also made for any tax paid under the Taxes Act 1988, IHTA84/S739 or 740 (under which income tax can be charged on capital payments received by UK beneficiaries of an overseas trust).