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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Pre-owned assets: avoidance of double charges: more than one charge under FA04/Sch15

It is possible that a chargeable person may be subject to the POA charge by reason of their occupation of land (IHTM44003) or use of chattels (IHTM44006) and also by reference to intangible property that derives its value from the land or chattel concerned. Where this is the case, the charge that gives rise to the higher amount will be levied; the other charge is disregarded completely, FA04/Sch15/Para18. This point is important in connection with the de minimis exemption - it is only the amount of the higher charge that is tested against the £5,000 limit (IHTM44056).

Example

Yasmina settles her shares in MyCo Ltd on trusts which are settlor-interested. MyCo Ltd owns Yasmina’s house, which she continues to occupy. Two charges, one in respect of the shares (IHTM44009) and one in respect of the land will arise. Whichever charge gives rise to the higher amount of tax payable will be pursued.

Note that the charge in respect of the land is the amount chargeable under FA04/Sch15/Para4, so this will include a deduction for any rent paid by Yasmina. FA04/Sch15/Para18(2) provides that for the purposes of the de minimis amount, it is the amount chargeable under the appropriate paragraph that is relevant. So if the rental value was £7,000 but Yasmina paid £4,000 towards it, the chargeable amount is £3,000. If the chargeable amount arising on the intangibles was £4,000, this is the higher charge and it is this value that must be tested against the de minimis limit. Normally, it would be the rental value of the land before deduction of the contribution from Yasmina that is tested against the de minimis limit, but FA04/Sch15/Para18(2) specifically provides that Yasmina’s contribution must be taken into account in these circumstances. The position would be same where chattels are concerned.