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HMRC internal manual

Inheritance Tax Manual

Pre-owned assets: election into Inheritance Tax: land & chattels

In order to avoid the POA charge and elect into IHT in respect of their enjoyment or use of land or chattels by 31 January next following a tax year, a person must be

  • subject to the POA charge on land (IHTM44003) or chattels (IHTM44006) for that year, FA04/Sch15/Para21(1)(a), and
  • must not have been chargeable under the relevant provision in any previous year of assessment by reference to their enjoyment or use of the property, or of any other property for which the relevant property has been substituted, FA04/Sch15/Para21(1)(b).

The chargeable person may then elect that the relevant property, or property substituted for it, shall not be subject to the POA charge, but instead, so long as they continue to enjoy or use the property, the chargeable portion (IHTM44072) of the property is to be treated as property subject to a reservation and FA86/S102(3) & (4) shall apply unless they are beneficially entitled to an interest in possession in which case the effect of the election is that IHTA1984/S53(3) & (4) and 54 (IHTM44050) are not to apply to the property.

Note that in order to make an election, a person must have been subject to the POA charge. If therefore the taxable benefit is below the de minimis limit (IHTM44056), it is not possible to make an election. No time limit for making an election (IHTM44075) therefore runs until such time as there is a taxable benefit.