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HMRC internal manual

Inheritance Tax Manual

Interaction with alternatively secured pensions: deceased’s estate includes funds in an alternatively secured pension

Before 6 April 2011 the Inheritance Tax (IHT) provisions for alternatively secured pensions (ASP) were changed to reflect the interaction of an ASP charge with the transfer of unused nil rate band. A charge arose on left-over ASP funds once a relevant dependant’s pension benefits ceased and the rates of tax were those applying at the date of that event rather than as at the date of death of the scheme member. This rule was modified so that, if the IHT nil-rate band was not fully used when the original ‘owner’ of the ASP died, the same proportion that was unused was applied to the amount of the nil rate band in force at the date of the later event and was available against the charge on the ASP funds.

In addition, a similar procedure to that applying to recapture charges on conditionally exempt property and woodlands was appropriate to ASP charges, to recognise whether the ASP charge arose before or after the death of the survivor.

The rules were repealed in the Finance Act 2011 for deaths on or after 6 April 2011, so it is very unlikely that you will see an ASP charge and a claim for a transfer of unused nil-rate band in these circumstances. You should seek advice from Technical if you do have a case with a charge under these rules.