Inheritance Tax Act 1984

PART IU.K. GENERAL

Main charges and definitionsU.K.

1 Charge on transfers.U.K.

[F1Inheritance tax] shall be charged on the value transferred by a chargeable transfer.

2 Chargeable transfers and exempt transfers.U.K.

(1)A chargeable transfer is a transfer of value which is made by an individual but is not (by virtue of Part II of this Act or any other enactment) an exempt transfer.

(2)A transfer of value made by an individual and exempt only to a limited extent—

(a)is, if all the value transferred by it is within the limit, an exempt transfer, and

(b)is, if that value is partly within and partly outside the limit, a chargeable transfer of so much of that value as is outside the limit as well as an exempt transfer of so much of that value as is within the limit.

(3)Except where the context otherwise requires, references in this Act to chargeable transfers, to their making or to the values transferred by them shall be construed as including references to occasions on which tax is chargeable under Chapter III of Part III of this Act (apart from section 79), to their occurrence or to the amounts on which tax is then chargeable.

3 Transfers of value.U.K.

(1)Subject to the following provisions of this Part of this Act, a transfer of value is a disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer.

(2)For the purposes of subsection (1) above no account shall be taken of the value of excluded property which ceases to form part of a person’s estate as a result of a disposition.

(3)[F2 Where the value of a person's estate is diminished, and the value—

(a)of another person's estate, or

(b)of any settled property, other than settled property treated by section 49(1) below as property to which a person is beneficially entitled,

is increased] by the first-mentioned person’s omission to exercise a right, he shall be treated for the purposes of this section as having made a disposition at the time (or latest time) when he could have exercised the right, unless it is shown that the omission was not deliberate.

(4)Except as otherwise provided, references in this Act to a transfer of value made, or made by any person, include references to events on the happening of which tax is chargeable as if a transfer of value had been made, or, as the case may be, had been made by that person; and “transferor” shall be construed accordingly.

[F33A Potentially exempt transfers.U.K.

(1)Any reference in this Act to a potentially exempt transfer is a reference to a transfer of value—

(a)which is made by an individual on or after 18th March 1986 [F4but before 22nd March 2006] ; and

(b)which, apart from this section, would be a chargeable transfer (or to the extent to which, apart from this section, it would be such a transfer); and

(c)to the extent that it constitutes either a gift to another individual or a gift into an accumulation and maintenance trust or a disabled trust;

F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F6(1A)Any reference in this Act to a potentially exempt transfer is also a reference to a transfer of value—

(a)which is made by an individual on or after 22nd March 2006,

(b)which, apart from this section, would be a chargeable transfer (or to the extent to which, apart from this section, it would be such a transfer), and

(c)to the extent that it constitutes—

(i)a gift to another individual,

(ii)a gift into a disabled trust, or

(iii)a gift into a bereaved minor's trust on the coming to an end of an immediate post-death interest.

(1B)Subsections (1) and (1A) above have effect subject to any provision of this Act which provides that a disposition (or transfer of value) of a particular description is not a potentially exempt transfer.]

(2)Subject to subsection (6) below, a transfer of value falls within subsection (1)(c) [F7 or (1A)(c)(i)] above, as a gift to another individual,—

(a)to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes comprised in the estate of that other individual, . . . F8, or

(b)so far as that value is not attributable to property which becomes comprised in the estate of another person, to the extent that, by virtue of the transfer, the estate of that other individual is increased, . . . F9

(3)Subject to subsection (6) below, a transfer of value falls within subsection (1)(c) above, as a gift into an accumulation and maintenance trust or a disabled trust, to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes settled property to which section 71 or 89 of this Act applies.

[F10(3A)Subject to subsection (6) below, a transfer of value falls within subsection (1A)(c)(ii) above to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes settled property to which section 89 below applies.

(3B)A transfer of value falls within subsection (1A)(c)(iii) above to the extent that the value transferred is attributable to settled property (whenever settled) that becomes property to which section 71A below applies in the following circumstances—

(a)under the settlement, a person (“L”) is beneficially entitled to an interest in possession in the settled property,

(b)the interest in possession is an immediate post-death interest,

(c)on or after 22nd March 2006, but during L's life, the interest in possession comes to an end,

(d)L is beneficially entitled to the interest in possession immediately before it comes to an end, and

(e)on the interest in possession coming to an end, the property—

(i)continues to be held on the trusts of the settlement, and

(ii)becomes property to which section 71A below applies.]

(4)A potentially exempt transfer which is made seven years or more before the death of the transferor is an exempt transfer and any other potentially exempt transfer is a chargeable transfer.

(5)During the period beginning on the date of a potentially exempt transfer and ending immediately before—

(a)the seventh anniversary of that date, or

(b)if it is earlier, the death of the transferor,

it shall be assumed for the purposes of this Act that the transfer will prove to be an exempt transfer.

(6)Where, under any provision of this Act F11. . . tax is in any circumstances to be charged as if a transfer of value had been made, that transfer shall be taken to be a transfer which is not a potentially exempt transfer.]

[F12(6A)The reference in subsection (6) above to any provision of this Act does not include section 52 below except where the transfer of value treated as made by that section is one treated as made on the coming to an end of an interest which falls within section 5(1B) below.]

[F13(7)In the application of this section to an event on the happening of which tax is chargeable under section 52 below, the reference in subsection (1)(a) [F14or (1A)(a)] above to the individual by whom the transfer of value is made is a reference to the person who, by virtue of section 3(4) above, is treated as the transferor.]

4 Transfers on death.U.K.

(1)On the death of any person tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death.

(2)For the purposes of this section, where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.

5 Meaning of estate.U.K.

(1)For the purposes of this Act a person’s estate is the aggregate of all the property to which he is beneficially entitled, [F15 except that—

(a)the estate of a person—

(i)does not include an interest in possession in settled property to which section 71A or 71D below applies, and

(ii)does not include an interest in possession that falls within subsection (1A) below [F16unless it falls within subsection (1B) below], and

(b)the] estate of a person immediately before his death does not include excluded property [F17or a foreign-owned work of art which is situated in the United Kingdom for one or more of the purposes of public display, cleaning and restoration (and for no other purpose).]

[F18(1A)An interest in possession falls within this subsection if—

(a)it is an interest in possession in settled property,

(b)the settled property is not property to which section 71A or 71D below applies,

(c)the person is beneficially entitled to the interest in possession,

(d)the person became beneficially entitled to the interest in possession on or after 22nd March 2006, and

(e)the interest in possession is—

(i)not an immediate post-death interest,

(ii)not a disabled person's interest, and

(iii)not a transitional serial interest.]

[F19(1B)An interest in possession falls within this subsection if the person—

(a)was domiciled in the United Kingdom on becoming beneficially entitled to it, and

(b)became beneficially entitled to it by virtue of a disposition which was prevented from being a transfer of value by section 10 below.]

(2)A person who has a general power which enables him, or would if he were sui juris enable him, to dispose of any property other than settled property, or to charge money on any property other than settled property, shall be treated as beneficially entitled to the property or money; and for this purpose “general power” means a power or authority enabling the person by whom it is exercisable to appoint or dispose of property as he thinks fit.

(3)In determining the value of a person’s estate at any time his liabilities at that time shall be taken into account, except as otherwise provided by this Act.

(4)The liabilities to be taken into account in determining the value of a transferor’s estate immediately after a transfer of value include his liability for [F20inheritance tax] on the value transferred but not his liability (if any) for any other tax or duty resulting from the transfer.

(5)Except in the case of a liability imposed by law, a liability incurred by a transferor shall be taken into account only to the extent that it was incurred for a consideration in money or money’s worth.

6 Excluded property.U.K.

(1)Property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom.

[F21(1A)A holding in an authorised unit trust and a share in an open-ended investment company is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom.]

[F22[F23(1B)A relevant decoration or award is excluded property if it has never been the subject of a disposition for a consideration in money or money's worth.

(1BA)In subsection (1B) “relevant decoration or award” means a decoration or other similar award—

(a)that is designed to be worn to denote membership of—

(i)an Order that is, or has been, specified in the Order of Wear published in the London Gazette (“the Order of Wear”), or

(ii)an Order of a country or territory outside the United Kingdom,

(b)that is, or has been, specified in the Order of Wear,

(c)that was awarded for valour or gallant conduct,

(d)that was awarded for, or in connection with, a person being, or having been, a member of, or employed or engaged in connection with, the armed forces of any country or territory,

(e)that was awarded for, or in connection with, a person being, or having been, an emergency responder within the meaning of section 153A (death of emergency service personnel etc), or

(f)that was awarded by the Crown or a country or territory outside the United Kingdom for, or in connection with, public service or achievement in public life.]

(1C)In subsection (1B) the reference to a disposition of the decoration or other award includes—

(a)a reference to a disposition of part of it, and

(b)a reference to a disposition of an interest in it (or in part of it).]

(2)Where securities have been issued by the Treasury subject to a condition authorised by section 22 of the M1Finance (No. 2) Act 1931 (or section 47 of the M2Finance (No. 2) Act 1915) for exemption from taxation so long as the securities are in the beneficial ownership of persons [F24of a description specified in the condition], the securities are excluded property if they are in the beneficial ownership of such a person.

(3)Where the person beneficially entitled to the rights conferred by any of the following, namely—

(a)war savings certificates;

(b)national savings certificates (including Ulster savings certificates);

(c)premium savings bonds;

(d)deposits with the National Savings Bank or with a trustee savings bank;

(e)a [F25certified SAYE savings arrangement] within the meaning of [F26section 703(1) of the Income Tax (Trading and Other Income) Act 2005];

is domiciled in the Channel Islands or the Isle of Man, the rights are excluded property.

(4)Property to which this subsection applies by virtue of section 155(1) [F27or (5A)] below is excluded property.

RatesU.K.

7 Rates.U.K.

(1)[F28Subject to subsections (2), (4) and (5) below] [F29and to [F30section 8D and] Schedule 1A] the tax charged on the value transferred by a chargeable transfer made by any transferor shall be charged at the following rate or rates, that is to say—

(a)if the transfer is the first chargeable transfer made by that transferor in the period of [F31seven years] ending with the date of the transfer, at the rate or rates applicable to that value under the . . . F32 Table in Schedule 1 to this Act;

(b)in any other case, at the rate or rates applicable under that Table to such part of the aggregate of—

(i)that value, and

(ii)the values transferred by previous chargeable transfers made by him in that period,

as is the highest part of that aggregate and is equal to that value.

[F33(2)Except as provided by subsection (4) below, the tax charged on the value transferred by a chargeable transfer made before the death of the transferor shall be charged at one-half of the rate or rates referred to in subsection (1) above.]

(3)In [F34the Table] in Schedule 1 to this Act any rate shown in the third column is that applicable to such portion of the value concerned as exceeds the lower limit shown in the first column but does not exceed the upper limit (if any) shown in the second column.

[F35(4)Subject to subsection (5) below, subsection (2) above does not apply in the case of a chargeable transfer made at any time within the period of seven years ending with the death of the transferor but, in the case of a chargeable transfer made within that period but more than three years before the death, the tax charged on the value transferred shall be charged at the following percentage of the rate or rates referred to in subsection (1) above—

(a)where the transfer is made more than three but not more than four years before the death, 80 per cent;

(b)where the transfer is made more than four but not more than five years before the death, 60 per cent;

(c)where the transfer is made more than five but not more than six years before the death, 40 per cent; and

(d)where the transfer is made more than six but not more than seven years before the death, 20 per cent.

(5)If, in the case of a chargeable transfer made before the death of the transferor, the tax which would fall to be charged in accordance with subsection (4) above is less than the tax which would have been chargeable (in accordance with subsection (2) above) if the transferor had not died within the period of seven years beginning with the date of the transfer, subsection (4) above shall not apply in the case of that transfer.]

8 Indexation of rate bands.U.K.

(1)If the [F36consumer prices index for the month of September in any year] is higher than it was for the [F37previous September], then, unless Parliament otherwise determines, section 7 above and Schedule 1 to this Act shall apply to chargeable transfers made on or after 6th April in the following year with the substitution of [F38a new Table for the Table] applying (whether by virtue of this section or otherwise) to earlier chargeable transfers.

F39(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)The new [F40Table] shall differ from the [F40Table] it replaces in that for each of the amounts specified in the first and second columns there shall be substituted amounts arrived at by increasing the previous amounts by the same percentage as the percentage increase in the [F41consumer prices index ] and, if the result is not a multiple of £1,000, rounding it up to the nearest amount which is such a multiple.

[F42(3)In this section, “consumer prices index” means the all items consumer prices index published by the Statistics Board.]

(4)The Treasury shall before 6th April [F371994] and each subsequent 6th April make an order specifying the amounts which by virtue of this section will be treated, in relation to chargeable transfers on or after that date, as specified in the [F43Table] in Schedule 1 to this Act; and any such order shall be made by statutory instrument.

[F448ATransfer of unused nil-rate band between spouses and civil partnersU.K.

(1)This section applies where—

(a)immediately before the death of a person (a “deceased person”), the deceased person had a spouse or civil partner (“the survivor”), and

(b)the deceased person had unused nil-rate band on death.

(2)A person has unused nil-rate band on death if—

(3)Where a claim is made under this section, the nil-rate band maximum at the time of the survivor's death is to be treated for the purposes of the charge to tax on the death of the survivor as increased by the percentage specified in subsection (4) below (but subject to subsection (5) and section 8C below).

(4)That percentage is—

(5)If (apart from this subsection) the amount of the increase in the nil-rate band maximum at the time of the survivor's death effected by this section would exceed the amount of that nil-rate band maximum, the amount of the increase is limited to the amount of that nil-rate band maximum.

(6)Subsection (5) above may apply either—

(a)because the percentage mentioned in subsection (4) above (as reduced under section 8C below where that section applies) is more than 100 because of the amount by which M is greater than VT in the case of one deceased person, or

(b)because this section applies in relation to the survivor by reference to the death of more than one person who had unused nil-rate band on death.

(7)In this Act “nil-rate band maximum” means the amount shown in the second column in the first row of the Table in Schedule 1 to this Act (upper limit of portion of value charged at rate of nil per cent.) and in the first column in the second row of that Table (lower limit of portion charged at next rate).

8BClaims under section 8AU.K.

(1)A claim under section 8A above may be made—

(a)by the personal representatives of the survivor within the permitted period, or

(b)(if no claim is so made) by any other person liable to the tax chargeable on the survivor's death within such later period as an officer of Revenue and Customs may in the particular case allow.

(2)If no claim under section 8A above has been made in relation to a person (P) by reference to whose death that section applies in relation to the survivor, the claim under that section in relation to the survivor may include a claim under that section in relation to P if that does not affect the tax chargeable on the value transferred by the chargeable transfer of value made on P's death.

(3)In subsection (1)(a) above “the permitted period” means—

(a)the period of two years from the end of the month in which the survivor dies or (if it ends later) the period of three months beginning with the date on which the personal representatives first act as such, or

(b)such longer period as an officer of Revenue and Customs may in the particular case allow.

(4)A claim made within either of the periods mentioned in subsection (3)(a) above may be withdrawn no later than one month after the end of the period concerned.

8CSection 8A and subsequent chargesU.K.

(1)This section applies where—

(a)the conditions in subsection (1)(a) and (b) of section 8A above are met, and

(b)after the death of the deceased person, tax is charged on an amount under any of sections 32, 32A and 126 below by reference to the rate or rates that would have been applicable to the amount if it were included in the value transferred by the chargeable transfer made (under section 4 above) on the deceased person's death.

(2)If the tax is charged before the death of the survivor, the percentage referred to in subsection (3) of section 8A above is (instead of that specified in subsection (4) of that section)—

(3)If this section has applied by reason of a previous event or events, the reference in subsection (2) to the fraction

is to the aggregate of that fraction in respect of the current event and the previous event (or each of the previous events).

(4)If the tax is charged after the death of the survivor, it is charged as if the personal nil-rate band maximum of the deceased person were appropriately reduced.

(5)In subsection (4) above—

• “the personal nil-rate band maximum of the deceased person” is the nil rate band maximum which is treated by Schedule 2 to this Act as applying in relation to the deceased person's death, increased in accordance with section 8A above where that section effected an increase in that nil-rate band maximum in the case of the deceased person (as survivor of another deceased person), and

• “appropriately reduced” means reduced by the amount (if any) by which the amount on which tax was charged at the rate of nil per cent. on the death of the survivor was increased by reason of the operation of section 8A above by virtue of the position of the deceased person.]

[F468DExtra nil-rate band on death if interest in home goes to descendants etcU.K.

(1)Subsections (2) and (3) apply for the purpose of calculating the amount of the charge to tax under section 4 on a person's death if the person dies on or after 6 April 2017.

(2)If the person's residence nil-rate amount is greater than nil, the portion of VT that does not exceed the person's residence nil-rate amount is charged at the rate of 0%.

(3)References in section 7(1) to the value transferred by the chargeable transfer under section 4 on the person's death are to be read as references to the remainder (if any) of VT.

(4)The person's residence nil-rate amount is calculated in accordance with sections 8E to 8G.

(5)For the purposes of those sections and this section—

(a)the “residential enhancement” is—

(i)£100,000 for the tax year 2017-18,

(ii)£125,000 for the tax year 2018-19,

(iii)£150,000 for the tax year 2019-20, and

(iv)£175,000 for the tax year 2020-21 and subsequent tax years,

but this is subject to subsections (6) and (7),

(b)the “taper threshold” is £2,000,000 for the tax year 2017-18 and subsequent tax years, but this is subject to subsections (6) and (7),

(c)TT is the taper threshold at the person's death,

(d)E is the value of the person's estate immediately before the person's death,

(e)VT is the value transferred by the chargeable transfer under section 4 on the person's death,

(f)the person's “default allowance” is the total of—

(i)the residential enhancement at the person's death, and

(ii)the person's brought-forward allowance (see section 8G), and

(g)the person's “adjusted allowance” is—

(i)the person's default allowance, less

(ii)the amount given by—

but is nil if that amount is greater than the person's default allowance.

(6)Subsection (7) applies if—

(a)the consumer prices index for the month of September in any tax year (“the prior tax year”) is higher than it was for the previous September, and

(b)the prior tax year is the tax year 2020-21 or a later tax year.

(7)Unless Parliament otherwise determines, the amount of each of—

(a)the residential enhancement for the tax year following the prior tax year, and

(b)the taper threshold for that following tax year,

is its amount for the prior tax year increased by the same percentage as the percentage increase in the index and, if the result is not a multiple of £1,000, rounded up to the nearest amount which is such a multiple.

(8)The Treasury must before 6 April 2021 and each subsequent 6 April make an order specifying the amounts that in accordance with subsections (6) and (7) are the residential enhancement and taper threshold for the tax year beginning on that date; and any such order is to be made by statutory instrument.

(9)In this section—

• “tax year” means a year beginning on 6 April and ending on the following 5 April, and

• “the tax year 2017-18” means the tax year beginning on 6 April 2017 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

8EResidence nil-rate amount: interest in home goes to descendants etcU.K.

(1)Subsections (2) to (7) apply if—

(a)the person's estate immediately before the person's death includes a qualifying residential interest, and

(b)N% of the interest is closely inherited, where N is a number—

(i)greater than 0, and

(ii)less than or equal to 100,

and in those subsections “NV/100” means N% of so much (if any) of the value transferred by the transfer of value under section 4 as is attributable to the interest.

(2)Where—

(a)E is less than or equal to TT, and

(b)NV/100 is less than the person's default allowance,

the person's residence nil-rate amount is equal to NV/100 and an amount, equal to the difference between NV/100 and the person's default allowance, is available for carry-forward.

(3)Where—

(a)E is less than or equal to TT, and

(b)NV/100 is greater than or equal to the person's default allowance,

the person's residence nil-rate amount is equal to the person's default allowance (and no amount is available for carry-forward).

(4)Where—

(a)E is greater than TT, and

(b)NV/100 is less than the person's adjusted allowance,

the person's residence nil-rate amount is equal to NV/100 and an amount, equal to the difference between NV/100 and the person's adjusted allowance, is available for carry-forward.

(5)Where—

(a)E is greater than TT, and

(b)NV/100 is greater than or equal to the person's adjusted allowance,

the person's residence nil-rate amount is equal to the person's adjusted allowance (and no amount is available for carry-forward).

(6)Subsections (2) to (5) have effect subject to subsection (7).

(7)Where the person's residence nil-rate amount as calculated under subsections (2) to (5) without applying this subsection is greater than VT—

(a)subsections (2) to (5) have effect as if each reference in them to NV/100 were a reference to VT,

(b)each of subsections (3) and (5) has effect as if it provided that the person's residence nil-rate amount were equal to VT (rather than the person's default allowance or, as the case may be, the person's adjusted allowance).

(8)See also—

• section 8H (meaning of “qualifying residential interest”),

• section 8J (meaning of “inherit”),

• section 8K (meaning of “closely inherited”), and

• section 8M (cases involving conditional exemption).

8FResidence nil-rate amount: no interest in home goes to descendants etcU.K.

(1)Subsections (2) and (3) apply if the person's estate immediately before the person's death—

(a)does not include a qualifying residential interest, or

(b)includes a qualifying residential interest but none of the interest is closely inherited.

(2)The person's residence nil-rate amount is nil.

(3)An amount—

(a)equal to the person's default allowance, or

(b)if E is greater than TT, equal to the person's adjusted allowance,

is available for carry-forward.

(4)See also—

• section 8H (meaning of “qualifying residential interest”),

• section 8J (meaning of “inherit”),

• section 8K (meaning of “closely inherited”), and

• section 8M (cases involving conditional exemption).

8GMeaning of “brought-forward allowance”U.K.

(1)This section is about the amount of the brought-forward allowance (see section 8D(5)(f)) for a person (“P”) who dies on or after 6 April 2017.

(2)In this section “related person” means a person other than P where—

(a)the other person dies before P, and

(b)immediately before the other person dies, P is the other person's spouse or civil partner.

(3)P's brought-forward allowance is calculated as follows—

(a)identify each amount available for carry-forward from the death of a related person (see sections 8E and 8F, and subsections (4) and (5)),

(b)express each such amount as a percentage of the residential enhancement at the death of the related person concerned,

(c)calculate the percentage that is the total of those percentages, and

(d)the amount that is that total percentage of the residential enhancement at P's death is P's brought-forward allowance or, if that total percentage is greater than 100%, P's brought-forward allowance is the amount of the residential enhancement at P's death,

but P's brought-forward allowance is nil if no claim for it is made under section 8L.

(4)Where the death of a related person occurs before 6 April 2017—

(a)an amount equal to £100,000 is treated for the purposes of subsection (3) as being the amount available for carry-forward from the related person's death, but this is subject to subsection (5), and

(b)the residential enhancement at the related person's death is treated for those purposes as being £100,000.

(5)If the value (“RPE”) of the related person's estate immediately before the related person's death is greater than £2,000,000, the amount treated under subsection (4)(a) as available for carry-forward is reduced (but not below nil) by—

8HMeaning of “qualifying residential interest”U.K.

(1)This section applies for the purposes of sections 8E and 8F.

(2)In this section “residential property interest”, in relation to a person, means an interest in a dwelling-house which has been the person's residence at a time when the person's estate included that, or any other, interest in the dwelling-house.

(3)Where a person's estate immediately before the person's death includes residential property interests in just one dwelling-house, the person's interests in that dwelling-house are a qualifying residential interest in relation to the person.

(4)Where—

(a)a person's estate immediately before the person's death includes residential property interests in each of two or more dwelling-houses, and

(b)the person's personal representatives nominate one (and only one) of those dwelling-houses,

the person's interests in the nominated dwelling-house are a qualifying residential interest in relation to the person.

(5)A reference in this section to a dwelling-house—

(a)includes any land occupied and enjoyed with it as its garden or grounds, but

(b)does not include, in the case of any particular person, any trees or underwood in relation to which an election is made under section 125 as it applies in relation to that person's death.

(6)If at any time when a person's estate includes an interest in a dwelling-house, the person—

(a)resides in living accommodation which for the person is job-related, and

(b)intends in due course to occupy the dwelling-house as the person's residence,

this section applies as if the dwelling-house were at that time occupied by the person as a residence.

(7)Section 222(8A) to (8D) of the 1992 Act (meaning of “job-related”), but not section 222(9) of that Act, apply for the purposes of subsection (6).

8JMeaning of “inherited”U.K.

(1)This section explains for the purposes of sections 8E and 8F whether a person (“B”) inherits, from a person who has died (“D”), property which forms part of D's estate immediately before D's death.

(2)B inherits the property if there is a disposition of it (whether effected by will, under the law relating to intestacy or otherwise) to B.

(3)Subsection (2) does not apply if—

(a)the property becomes comprised in a settlement on D's death, or

(b)immediately before D's death, the property was settled property in which D was beneficially entitled to an interest in possession.

(4)Where the property becomes comprised in a settlement on D's death, B inherits the property if—

(a)B becomes beneficially entitled on D's death to an interest in possession in the property, and that interest in possession is an immediate post-death interest or a disabled person's interest, or

(b)the property becomes, on D's death, settled property—

(i)to which section 71A or 71D applies, and

(ii)held on trusts for the benefit of B.

(5)Where, immediately before D's death, the property was settled property in which D was beneficially entitled to an interest in possession, B inherits the property if B becomes beneficially entitled to it on D's death.

(6)Where the property forms part of D's estate immediately before D's death as a result of the operation of section 102(3) of the Finance Act 1986 (gifts with reservation) in relation to a disposal of the property made by D by way of gift, B inherits the property if B is the person to whom the disposal was made.

8KMeaning of “closely inherited”U.K.

(1)In relation to the death of a person (“D”), something is “closely inherited” for the purposes of sections 8E and 8F if it is inherited for those purposes (see section 8J) by—

(a)a lineal descendant of D,

(b)a person who, at the time of D's death, is the spouse or civil partner of a lineal descendant of D, or

(c)a person who—

(i)at the time of the death of a lineal descendant of D who died no later than D, was the spouse or civil partner of the lineal descendant, and

(ii)has not, in the period beginning with the lineal descendant's death and ending with D's death, become anyone's spouse or civil partner.

(2)The rules in subsections (3) to (8) apply for the interpretation of subsection (1).

(3)A person who is at any time a step-child of another person is to be treated, at that and all subsequent times, as if the person was that other person's child.

(4)Any rule of law, so far as it requires an adopted person to be treated as not being the child of a natural parent of the person, is to be disregarded (but this is without prejudice to any rule of law requiring an adopted person to be treated as the child of an adopter of the person).

(5)A person who is at any time fostered by a foster parent is to be treated, at that and all subsequent times, as if the person was the foster parent's child.

(6)Where—

(a)an individual (“G”) is appointed (or is treated by law as having been appointed) under section 5 of the Children Act 1989, or under corresponding law having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, as guardian (however styled) of another person, and

(b)the appointment takes effect at a time when the other person (“C”) is under the age of 18 years,

C is to be treated, at all times after the appointment takes effect, as if C was G's child.

(7)Where—

(a)an individual (“SG”) is appointed as a special guardian (however styled) of another person (“C”) by an order of a court—

(i)that is a special guardianship order as defined by section 14A of the Children Act 1989, or

(ii)that is a corresponding order under legislation having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, and

(b)the appointment takes effect at a time when C is under the age of 18 years,

C is to be treated, at all times after the appointment takes effect, as if C was SG's child.

(8)In particular, where under any of subsections (3) to (7) one person is to be treated at any time as the child of another person, that first person's lineal descendants (even if born before that time) are accordingly to be treated at that time (and all subsequent times) as lineal descendants of that other person.

(9)In subsection (4) “adopted person” means—

(a)an adopted person within the meaning of Chapter 4 of Part 1 of the Adoption and Children Act 2002, or

(b)a person who would be an adopted person within the meaning of that Chapter if, in section 66(1)(e) of that Act and section 38(1)(e) of the Adoption Act 1976, the reference to the law of England and Wales were a reference to the law of any part of the United Kingdom.

(10)In subsection (5) “foster parent” means—

(a)someone who is approved as a local authority foster parent in accordance with regulations made by virtue of paragraph 12F of Schedule 2 to the Children Act 1989,

(b)a foster parent with whom the person is placed by a voluntary organisation under section 59(1)(a) that Act,

(c)someone who looks after the person in circumstances in which the person is a privately fostered child as defined by section 66 of that Act, or

(d)someone who, under legislation having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, is a foster parent (however styled) corresponding to a foster parent within paragraph (a) or (b).

8LClaims for brought-forward allowanceU.K.

(1)A claim for brought-forward allowance for a person (see section 8G) may be made—

(a)by the person's personal representatives within the permitted period, or

(b)(if no claim is so made) by any other person liable to the tax chargeable on the person's death within such later period as an officer of Revenue and Customs may in the particular case allow.

(2)In subsection (1)(a) “the permitted period” means—

(a)the period of 2 years from the end of the month in which the person dies or (if it ends later) the period of 3 months beginning with the date on which the personal representatives first act as such, or

(b)such longer period as an officer of Revenue and Customs may in the particular case allow.

(3)A claim under subsection (1) made within either of the periods mentioned in subsection (2)(a) may be withdrawn no later than one month after the end of the period concerned.

(4)Subsection (5) applies if—

(a)no claim under this section has been made for brought-forward allowance for a person (“P”),

(b)the amount of the charge to tax under section 4 on the death of another person (“A”) would be different if a claim under subsection (1) had been made for brought-forward allowance for P, and

(c)the amount of the charge to tax under section 4 on the death of P, and the amount of the charge to tax under section 4 on the death of any person who is neither P nor A, would not have been different if a claim under subsection (1) had been made for brought-forward allowance for P.

(5)A claim for brought-forward allowance for P may be made—

(a)by A's personal representatives within the allowed period, or

(b)(if no claim is so made) by any other person liable to the tax chargeable on A's death within such later period as an officer of Revenue and Customs may in the particular case allow.

(6)In subsection (5)(a) “the allowed period” means—

(a)the period of 2 years from the end of the month in which A dies or (if it ends later) the period of 3 months beginning with the date on which the personal representatives first act as such, or

(b)such longer period as an officer of Revenue and Customs may in the particular case allow.

(7)A claim under subsection (5) made within either of the periods mentioned in subsection (6)(a) may be withdrawn no later than one month after the end of the period concerned.

8MResidence nil-rate amount: cases involving conditional exemptionU.K.

(1)This section applies where—

(a)the estate of a person (“D”) immediately before D's death includes a qualifying residential interest,

(b)D dies on or after 6 April 2017, and

(c)some or all of the transfer of value under section 4 on D's death is a conditionally exempt transfer of property consisting of, or including, some or all of the qualifying residential interest.

(2)For the purposes of sections 8E and 8F, but subject to subsection (3), the exempt percentage of the qualifying residential interest is treated as being not closely inherited; and for this purpose “the exempt percentage” is given by—

(3)For the purposes of calculating tax chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest where D is the relevant person for the purposes of section 33—

(a)in subsection (2), X is calculated as if the property forming the subject-matter of the conditionally exempt transfer had not included the property on which the tax is chargeable,

(b)section 33 has effect as if for subsection (1)(b)(ii) there were substituted—

“(ii)if the relevant person is dead, the rate or rates that would have applied to that amount in accordance with section 8D(2) and (3) above and the appropriate provision of section 7 above if—

(a)that amount had been added to the value transferred on the relevant person's death, and

(b)the unrelieved portion of that amount had formed the highest part of that value.”, and

(c)for the purposes of that substituted section 33(1)(b)(ii) “ the unrelieved portion ” of the amount on which tax is chargeable is that amount itself less the amount (if any) by which—

(i)D's residence nil-rate amount for the purposes of the particular calculation under section 33, exceeds

(ii)D's residence nil-rate amount for the purposes of the charge to tax under section 4 on D's death.

(4)The following provisions of this section apply if immediately before D's death there is a person (“P”) who is D's spouse or civil partner.

(5)For the purposes of calculating tax chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest which occurs after P's death, the amount that would otherwise be D's residence nil-rate amount for those purposes is reduced by the amount (if any) by which P's residence nil-rate amount, or the residence nil-rate amount of any person who dies after P but before the chargeable event occurs, was increased by reason of an amount being available for carry-forward from D's death.

(6)Where tax is chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest which occurs before P's death, section 8G(3) has effect for the purpose of calculating P's brought-forward allowance as if—

(a)before the “and” at the end of paragraph (c) there were inserted—

“(ca)reduce that total (but not below nil) by deducting from it the recapture percentage,”,

(b)in paragraph (d), before “total”, in both places, there were inserted “reduced”, and

(c)the reference to the recapture percentage were to the percentage given by—

(7)If subsection (6) has applied by reason of a previous event or events related to the qualifying residential interest, the reference in subsection (6)(c) to the fraction—]

9 Transitional provisions on reduction of tax.U.K.

The transitional provisions in Schedule 2 to this Act shall have effect in relation to any enactment by virtue of which tax is reduced by the substitution of [F47a new Table] in Schedule 1.

Dispositions that are not transfers of valueU.K.

10 Dispositions not intended to confer gratuitous benefit.U.K.

(1)A disposition is not a transfer of value if it is shown that it was not intented, and was not made in a transaction intended, to confer any gratuitous benefit on any person and either—

(a)that it was made in a transaction at arm’s length between persons not connected with each other, or

(b)that it was such as might be expected to be made in a transaction at arm’s length between persons not connected with each other.

(2)Subsection (1) above shall not apply to a sale of [F48unquoted shares or unquoted debentures] unless it is shown that the sale was at a price freely negotiated at the time of the sale or at a price such as might be expected to have been freely negotiated at the time of the sale.

(3)In this section—

• “disposition” includes anything treated as a disposition by virtue of section 3(3) above;

• “transaction” includes a series of transactions and any associated operations.

11 Dispositions for maintenance of family.U.K.

(1)A disposition is not a transfer of value if it is made by one party to a marriage [F49or civil partnership] in favour of the other party or of a child of either party and is—

(a)for the maintenance of the other party, or

(b)for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(2)A disposition is not a transfer of value if it is made in favour of a child who is not in the care of a parent of his and is for his maintenance, education or training for a period ending not later than the year in which—

(a)he attains the age of eighteen, or

(b)after attaining that age he ceases to undergo full-time education or training;

but paragraph (b) above applies only if before attaining that age the child has for substantial periods been in the care of the person making the disposition.

(3)A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance.

(4)A disposition is not a transfer of value if it is made in favour of an illegitimate child of the person making the disposition and is for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(5)Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

(6)In this section—

• “child” includes a step-child and an adopted child and “parent” shall be construed accordingly;

• [F50“civil partnership”, in relation to a disposition made on the occasion of the dissolution or annulment of a civil partnership, and in relation to a disposition varying a disposition so made, includes a former civil partnership;]

• “dependent relative” means in relation to any person—

  (a)

  a relative of his, or of his spouse [F51or civil partner] , who is incapacitated by old age or infirmity from maintaining himself, or

  (b)

  [F52his mother or father or his spouse's or civil partner's mother or father;]

• “marriage”, in relation to a disposition made on the occasion of the dissolution or annulment of a marriage, and in relation to a disposition varying a disposition so made, includes a former marriage;

• “year” means period of twelve months ending with 5th April.

12 Dispositions allowable for income tax or conferring [F53benefits under pension scheme].U.K.

(1)A disposition made by any person is not a transfer of value if it is allowable in computing that person’s profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.

(2)Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if [F54it is a contribution under a registered pension scheme [F55, a qualifying non-UK pension scheme or a] section 615(3) scheme in respect of an employee of the person making the disposition.]

[F56(2ZA)Where a person who is a member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme omits to exercise pension rights under the pension scheme, section 3(3) above does not apply in relation to the omission.]

F57[F58(2A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F57(2B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F57(2C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F57(2D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F57(2E). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2F)For the purposes of this section—

(a)a person omits to exercise pension rights under a pension scheme if he does not become entitled to the whole or any part of a pension or lump sum (or both) under the pension scheme at a time when he was eligible to become so entitled (whether or not he does become entitled to any other benefits under the pension scheme); F59. . .

(b)F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2G)In this section—

• “entitled”, in relation to a pension or lump sum, shall be construed in accordance with section 165(3) or 166(2) of the Finance Act 2004;

• F60. . .

• “pension” has the same meaning as in [F61Part 4] of that Act (see section 165(2) of that Act);

• F60. . .

• F60. . . ]

F62(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F62(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

13 Dispositions by close companies for benefit of employees.U.K.

(1)A disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in section 86(1) below is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(a)the persons employed by or holding office with the company, or

(b)the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(2)Subsection (1) above shall not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in section 86(1) below or later) for the benefit of—

(a)a person who is a participator in the company making the disposition, or

(b)any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value, or

(c)any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company, or

(d)any person who is connected with any person within paragraph (a), (b) or (c) above.

(3)The participators in a company who are referred to in subsection (2) above do not include any participator who—

(a)is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b)on a winding-up of the company would not be entitled to 5 per cent. or more of its assets.

(4)In determining whether the trusts permit property to be applied as mentioned in subsection (2) above, no account shall be taken—

(a)of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(b)if the trusts are those of a profit sharing scheme approved under [F63Schedule 9 to the M3Taxes Act 1988], of any power to appropriate shares in pursuance of the scheme [F64; or].

[F64(c)if the trusts are those of [F65a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003] , of any power to appropriate shares to, or acquire shares on behalf of, individuals under the plan.]

(5)In this section—

• “close company” and “participator” have the same meanings as in Part IV of this Act;

• “ordinary shares” means shares which carry either—

  (a)

  a right to dividends not restricted to dividends at a fixed rate, or

  (b)

  a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above,

• “subsidiary” has [F66the meaning given by section [F671159 of and Schedule 6 to]] the [F68Companies Act [F692006]];

and references in subsections (2) and (3) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.

[F7013ADispositions by close companies to employee-ownership trustsU.K.

(1)A disposition of property made to trustees by a close company (“C”) whereby the property is to be held on trusts of the description specified in section 86(1) is not a transfer of value if—

(a)C meets the trading requirement,

(b)the trusts are of a settlement which meets the all-employee benefit requirement, and

(c)the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the disposition of property occurs but does meet it at the end of that year.

(2)Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—

(a)C meets the trading requirement;

(b)the settlement meets the all-employee benefit requirement;

(c)the settlement meets the controlling interest requirement;

with references in those sections to “C” being read accordingly.

(3)In this section—

• “close company” has the same meaning as in Part 4 of this Act;

• “tax year” means a year beginning on 6 April and ending on the following 5 April.]

14 Waiver of remuneration.U.K.

(1)Subject to subsection (2) below, the waiver or repayment of an amount of remuneration is not a transfer of value if, apart from the waiver or repayment, that amount [F71would be earnings, or would be treated as earnings, and would constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003)] .

(2)Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section shall apply only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.

15 Waiver of dividends.U.K.

A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.

16 Grant of tenancies of agricultural property.U.K.

(1)The grant of a tenancy of agricultural property in the United Kingdom, the Channel Islands or the Isle of Man for use for agricultural purposes is not a transfer of value by the grantor if he makes it for full consideration in money or money’s worth.

(2)Expressions used in subsection (1) above and in Chapter II of Part V of this Act have the same meaning in that subsection as in that Chapter.

17 Changes in distribution of deceased’s estate, etc.U.K.

None of the following is a transfer of value—

(a)a variation or disclaimer to which section 142(1) below applies;

(b)a transfer to which section 143 below applies;

F72(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)the renunciation of a claim to legitim [F73or rights under section 131 of the Civil Partnership Act 2004] within the period mentioned in section 147(6) below.