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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: excluded transactions: the contribution condition - outright gift of money

For the purposes of the contribution conditions relating to land and chattels, the contribution by a person to the acquisition of any property is an excluded transaction in relation to the chargeable person if it was an outright gift of money to the other person (and ‘other person’ here means the person referred to in FA04/Sch15/Paras 3(3) and 6(3)) and was made at least 7 years before the earliest date after 5 April 2005 on which the chargeable person

  • occupied the land, or
  • had possession or use of the chattel, FA04/Sch15/Para 10(2)(c).

As the earliest date a POA charge can arise is 6 April 2005, any contribution by way of an outright gift of cash made before 6 April 1998 will be an excluded transaction, irrespective of when the person subsequently went into occupation.

There are a number of other points to note with this exclusion

  • where the outright gift was made before 6 April 1998, it does not matter if the donor occupied the land or used the chattels within 7 years of the gift,
  • the outright gift must have been of money, it cannot be of other assets that are subsequently sold and it cannot be a loan that is subsequently written off,
  • unlike the exclusion in FA04/Sch15/Para 10(2)(e) (IHTM44038), the outright gift is to a person and not only to a person who is an individual - so this exclusion can include a gift to trustees,
  • if the outright gift was made after 6 April 1998, then even if the occupation arises before 6 April 2005, the exclusion will not apply.