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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Pre-owned assets: exemptions: reservation of benefit in the relevant property

The charging provisions relating to land (IHTM44003), chattels (IHTM44006) and intangible property (IHTM44009) do not apply to a person at a time when the relevant property would be property subject to a reservation (should an Inheritance Tax charge have been in point) or there is other property subject to a reservation which

  • derives its value from the relevant property, and
  • whose value, so far as attributable to the relevant property, is not substantially less than the value of the relevant property, (IHTM44045).

The logic behind this exemption, contained in FA04/Sch15/Para 11(3) & (5)(a), is that where the transaction would be subject to an IHT charge as a GWR, it should not also be subject to the POA charge.

Example

Margaret gives her house to her son and continues to occupy the property rent-free. The house is property subject to a reservation of benefit and would be subject to charge under FA86/S102 should the occasion arise. The POA charge does not arise.

In addition, where transactions that meet certain conditions are specifically excluded from the GWR charge, they are also excluded from the POA charge (IHTM44046), the logic being that generally, either the reservation of benefit charge or the POA charge should apply. If the former is statutorily excluded, that should not be the means to bring about a POA charge.