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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: exemptions: reservation of benefit in property but for certain exemptions

The reservation of benefit provisions do not apply to disposals by way of gift that are exempt from Inheritance Tax (IHTM11000). FA04/Sch15/Para11(5)(b) provides that the POA charge does not apply where property would be subject to a reservation of benefit (IHTM14301) but for the following exemptions

  • gifts to charities (IHTM11101),
  • gifts to political parties (IHTM11191),
  • gifts to housing associations (IHTM11211),
  • gifts for national purposes (IHTM11221),
  • maintenance funds for historic houses (IHTM11250), and
  • employee trusts.

Note that where the disposal is to a maintenance fund, the POA charge is only disapplied when the property remains subject to the trusts complying with the requirements for maintenance funds, FA04/Sch15/Para11(10).

Note also that a gift to a spouse or civil partner which is exempt from the reservation of benefit provisions (IHTM14318), is not exempt under this provision, but is instead an excluded transaction under FA04/Sch15/Para10(1)(b) (IHTM44032).