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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Pre-owned assets: exemptions: reservation of benefit in property that derives its value from the relevant property

The exemption in FA04/Sch15/Para 11(3) & (5)(a) (IHTM44044) also applies to relevant property where a person’s estate includes property which derives its value from that property. FA04/Sch15/Para 11(4). Where the value of the derivative property, so far as is attributable to the relevant property, is substantially less than the value of the relevant property

  • the appropriate rental value of the relevant land, or
  • the appropriate amount in respect of the chattel, or
  • the chargeable amount in relation to the relevant intangible property

must be reduced by such proportion as is reasonable to take account of the inclusion of the derivative property in the person’s estate. You should normally regard the value of the derivative property as being “substantially less” than that of the relevant property where the difference in value is more than 20%. Any case where you consider the exemption should apply (or not apply) in full and there is a reduction of more (or less) than 20% should be referred to Technical.


Jane settles some money on a relevant property trust under which she is not excluded from being a beneficiary. The trust then subscribes for shares in a company which then buys the house in which Jane lives. The house is relevant property (as Jane has disposed of property and continues to occupy it) and Jane also meets the contribution condition (IHTM44005). The shares would be subject to charge under FA86/S102 should the occasion arise and the shares derive their value from the relevant property, so the POA charge does not arise.