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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Pre-owned assets: property in charge: the contribution condition - land

The contribution condition is met if the chargeable person, at any time after 17 March 1986, has provided, directly or indirectly, any of the consideration given by another person for the acquisition of an interest in

  • the relevant land, FA04/Sch15/Para 3(3)(a), or
  • any other property the proceeds of the disposal of which were directly or indirectly applied by another person towards an acquisition of an interest in the relevant land, FA04/Sch15/Para 3(3)(b).

As with the disposal condition (IHTM44004), if the provision of the consideration qualifies as an excluded transaction (IHTM44030), this condition will not apply.

The contribution condition applies not only where the contribution provided by the chargeable person is directly used to buy the relevant land but also where the contribution is indirect as well. So, if the chargeable person provided all or part of the consideration for the purchase of property for another person and that person then sold that property and used the proceeds to purchase other land occupied by the chargeable person, the contribution condition is satisfied.


Trevor gives Paul the funds to buy Blackacre. Paul then sells Blackacre and buys The Paddocks with the proceeds. Trevor then occupies The Paddocks. The contribution condition is met.

You do not need to show that when the contribution was made, the individual intended to occupy the land purchased by another; if the chargeable person occupies land that they have, as a matter of fact, indirectly contributed to the purchase of, the contribution condition is met.

The contribution condition does not only apply to cash contributions. So in the example at IHTM44004, where Paul exchanges The Paddocks for Whiteacre, the gift of The Paddocks from Trevor to Paul is a contribution to the acquisition of the property that Trevor subsequently occupied and so the contribution condition is met.

However, the contribution condition is not met where the chargeable person resides in property purchased by another with money loaned by the chargeable person. This is because the outstanding debt will form part of the lender’s estate for Inheritance Tax purposes, and the lender cannot be said to have provided a contribution to the purchase of that property when that money has to be repaid to them, even if the loan was interest free. It follows that the ‘lender’, in such an arrangement, is not subject to a POA charge.