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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: exemptions: sale of part share

Where a person sells a part of their interest in land at full market value, the transaction is a disposal for FA04/Sch15/Para3(2), and as it is not an excluded transaction (IHTM44031), a POA charge should arise. However, The Charge to Income Tax by Reference to Enjoyment of Property Previously Owned Regulations SI2005/724 at regulation 5 provides an additional exemption for a disposal of part of an interest in property.

Where a transaction is made at arm’s length between unconnected persons, regulation 5(1)(a) provides that the POA charge does not apply whenever the sale was made. So the sale of a part share of property to commercial providers of equity release schemes is not subject to the POA charge. Nor is a sale for full consideration of a part share of property between a cohabiting couple who are not married or in a civil partnership.

The same applies to disposals of a part share to anyone provided that they were made on arm’s length terms and either took place before 7 March 2005 (regulation 5(b)(ii)), or took place on or after that date for a consideration not in the form of money or assets readily convertible into money (regulation 5(1)(b)(i)). This regulation may also apply where someone acquires their interest in a property by way of an equitable arrangement, rather than for cash, for example where the person has given up work to care for the owner of the property on the understanding that they will acquire a share of the property in return.