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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Meaning of estate for s.142: settled property

Settled property (IHTM16000) in which the deceased had an interest in possession (IIP) (IHTM16061) is excluded from the death estate for the purposes of IHTA84/S142 (1) by IHTA84/S142 (5). However we do not apply that exclusion to settled property

  • in which the deceased had a beneficial IIP, if
  • the deceased had and exercised by Will a general power of appointment over it.

Where both these conditions are satisfied, you should treat the settled property as part of the death estate for the purposes of IHTA84/S142 (1).

The taxpayers may seek to extend this treatment, to cases where the deceased

  • had exercised the general power of appointment by deed
  • had a general power but had not exercised it, or
  • had a general power but not a beneficial IIP in the trust property.

Where this occurs, you should ask them to demonstrate the grounds on which they consider the particular situation falls within the scope of the legislation. Then, if they press, or if they appear to have a persuasive argument, you should refer the case to TG.