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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: exemptions: introduction

There are a number of circumstances in which the POA charge under FA04/Sch15 does not apply. This is where the transaction meets the conditions for one of the exemptions outlined below or the transactions are excluded from the charge (IHTM44030). Note there is an essential difference between these two sets of provisions; if a transaction qualifies as an excluded transaction it cannot fall within the POA charge in view of the terms of FA04/Sch15/Para 3(2)(b) and para 6(2)(b) - the exclusions do not apply to intangibles (IHTM44009). On the other hand, once the all the conditions are met for a POA charge to arise, the transaction may then qualify as an exempt transaction - and the exemptions apply to land, chattels and intangibles. So, you must therefore consider first whether or not the transaction is excluded from charge before considering whether any of the exemptions are in point.

The exemptions are where

  • the property remains part of the person’s Inheritance Tax estate, (IHTM44041)
  • the property is subject to a reservation of benefit, (IHTM44044)
  • there is a foreign element, (IHTM44052)
  • the amount of the charge is de minimis, (IHTM44056)
  • there are changes in the distribution of a deceased’s estate (IHTM44057), or
  • a person acts as guarantor (IHTM44058)