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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: introduction

FA04/Sch15 provides for a charge to income tax on benefits received by a former owner of property. In this guidance we refer to this as the pre-owned assets (POA) charge. It applies to individuals (described in this guidance as ‘the chargeable person’) who continue to receive benefits from certain types of assets that they once owned after 17 March 1986 but have since disposed of. The first year in which the POA charge could arise was the tax year 2005/06.

The POA charge applies to three types of assets

  • land (IHTM44003)
  • household and personal goods (referred to in this guidance as chattels) (IHTM44006), and
  • intangible property or cash, stocks and shares and insurance products (IHTM44009)

The conditions required for the charge to apply are virtually the same for land or chattels but they are slightly different for intangible property.

If the chargeable person has either disposed of any such assets by making a gift or, in some circumstances, by selling them, or has contributed towards the purchase of the asset in question and they continue to receive some benefit from it, they are potentially liable to the charge. The benefit may be occupation of the land, use or possession of the chattel or the ability to receive income or capital from a settlement holding intangible property.

The scope of the POA charge is very wide and to limit its scope there are

  • transactions which are excluded from the charge, (IHTM44030) and
  • provisions which exempt property from the charge (IHTM44040).

If the POA charge applies, there are provisions which set out how the taxable benefit is to be calculated.