(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) an amount of the 100% relief allowance of the deceased person is unused on death.
(2) A person has an amount of unused 100% relief allowance on death if the total 100% relieved amount is less than the deceased person’s final allowance amount.
(3) Accordingly, the “unused 100% relief allowance” in relation to the person is the difference between those amounts.
(4) In this section—
(a) the “total 100% relieved amount” is the total amount by which values transferred by chargeable transfers made by the deceased person in the period of seven years ending with the day on which the deceased person died were treated as reduced as a result of section 104(1A) or 116(1A), and
(b) the “final allowance amount” in relation to a person means the amount specified in section 124D(2)(a) that has effect on the day on which the person dies.
(5) Where a claim is made under this section, the survivor’s final allowance amount, for the purposes of the charge to tax on the death of the survivor, is increased by the lesser of the amount of the survivor’s final allowance amount and—
(a) the amount given by multiplying the survivor’s final allowance amount by the unused percentage of the deceased person, or
(b) where the survivor is the survivor in relation to more than one deceased person, the amount given by multiplying the survivor’s final allowance amount by the sum of the unused percentages of those deceased persons.
(6) The unused percentage of the deceased person means the percentage given by dividing—
(a) the unused 100% relief allowance in relation to the deceased person, by
(b) the deceased person’s final allowance amount.
(1) A claim under section 124E 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 124E 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) “the permitted period” means—
(a) the period of four years from the end of the month in which the survivor dies or (if it ends later) the period of six 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) may be withdrawn no later than one month after the end of the period concerned.
(1) This section applies for the purpose of determining the amount of the 100% trust relief allowance available in relation to an occasion on which tax is charged under section 64 or 65 in relation to a settlement (“the relevant settlement”) for the purposes of—
(a) section 104(1B) (business property relief), and
(b) section 116(1B) (agricultural property relief).
(2) The 100% trust relief allowance available in relation to an occasion on which tax is charged under section 64 or 65 (“the relevant occasion”) in relation to the relevant settlement is equal to—
(a) the trust maximum allowance (see sections 124H and 124I) for the relevant occasion, less
(b) the total amount by which the values charged on occasions on which tax was charged under section 64 or 65 in relation to the relevant settlement in the allowance period were treated as reduced as a result of section 104(1B) or 116(1B).
(3) The allowance period means the period—
(a) beginning with—
(i) the first day of the second quarter in the period beginning with the date of the most recent ten-year anniversary (within the meaning of Chapter 3 of Part 3) of the relevant settlement, or
(ii) if there has not yet been a ten-year anniversary of the relevant settlement, the first day of the second quarter in the period beginning with the date on which the settlement commenced, and
(b) ending with the day before the relevant occasion occurred.
(4) But where—
(a) more than one conditionally relievable occasion occurs on the same day, and
(b) the sum of the potentially relievable values in relation to those occasions exceeds the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day,
the 100% trust relief allowance available in relation to those occasions is to be determined under subsection (5) (instead of under subsection (2)).
(5) The 100% trust relief allowance available in relation to each of those occasions is the amount given by multiplying—
(a) the amount given by dividing the potentially relievable value in relation to that occasion by the sum of the potentially relievable values in relation to each of those occasions, by
(b) the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day.
(6) For the purposes of this section—
(a) a “conditionally relievable occasion” means an occasion on which—
(i) tax is charged under section 64 or 65 in relation to the relevant settlement, and
(ii) section 104(1B) or 116(1B) would apply to reduce the value charged if there were an amount of the 100% trust relief allowance available in relation to it, and
(b) the potentially relievable value, in relation to an occasion on which tax is charged under section 64 or 65, is so much of the value as otherwise would have been charged on that occasion as would be treated as reduced as a result of section 104(1B) or 116(1B) if the 100% trust relief allowance available in relation to it were unlimited.
(1) The trust maximum allowance for an occasion on which tax is chargeable under section 64 or 65 in relation to a settlement (“the relevant settlement”), other than a qualifying pre-commencement settlement (within the meaning of section 124I), is the sum of transferred allowance amounts the relevant settlement has acquired.
(2) The relevant settlement acquires a transferred allowance amount if—
(a) there is a chargeable transfer of qualifying relievable property that results in the property becoming comprised in the relevant settlement, or
(b) tax is charged as if there was a transfer of value of qualifying relievable property comprised in the relevant settlement as a result of section 4(1) (transfers on death) or section 52(1) (charge on termination of interest in possession).
(3) The transferred allowance amount in relation to a transfer (or deemed transfer) is equal to so much of the value of the qualifying relievable property as does not exceed the maximum allowance cap in relation to it (and if the cap is nil or less, no transferred allowance amount is acquired).
(4) The maximum allowance cap in relation to qualifying relievable property is equal to—
(a) £2.5 million, less
(b) the sum of transferred allowance amounts previously acquired by—
(i) the relevant settlement, or
(ii) any other settlement made by the settlor of the relevant settlement.
(5) But where more than one transfer referred to in subsection (2)(a) or (b), occurs (or is deemed to occur for the purpose of charging tax) on the same day, the maximum allowance cap is allocated between the qualifying relievable property that is the subject of each transfer in proportion to their value.
(6) Property is qualifying relievable property to the extent that on its transfer (or deemed transfer)—
(a) it becomes relevant property, and
(b) the value of the transfer is treated as reduced as a result of section 104(1A) or 116(1A).
(7) For the purposes of this section, the value of qualifying relievable property is equal to so much of the amount of the value transferred on its transfer (or deemed transfer) as is treated as reduced as a result of section 104(1A) or 116(1A).
(8) The determination of whether property is qualifying relievable property, and its value, is to be made as it would be made at the time of the transfer (and accordingly ignoring the occurrence of any subsequent events).
(9) In this section and in section 124I “relevant property” has the meaning it has in Chapter 3 of Part 3 (see section 58).
124I Trust maximum allowance (qualifying pre-commencement settlements)
(1) The trust maximum allowance for an occasion on which tax is chargeable under section 64 or 65 in relation to a qualifying pre-commencement settlement is £2.5 million.
(2) A settlement is a qualifying pre-commencement settlement if—
(a) the settlement commenced before 30 October 2024, and
(b) had there been an occasion on which tax is chargeable under Chapter 3 of Part 3 (apart from section 79), immediately before that date in relation to all of the property comprised in the settlement, at least some of the amount on which tax would then be chargeable would be treated as reduced as a result of subsection (1B) of section 104 or 116 if—
(i) the amendments made to those sections by paragraphs 2, 3 and 12 of Schedule 12 to the Finance Act 2026 had been in force,
(ii) sections 106, 117 and 123 (minimum periods of ownership or occupation) were ignored,
(iii) all of the property had been relevant property, and
(iv) there were an amount of the 100% trust relief allowance available in relation to it.
(3) The condition in subsection (2)(b) is to be treated as met if—
(a) some or all of the property comprised in the settlement is agricultural property let on a tenancy beginning before 1st September 1995,
(b) the transferor’s interest condition in section 116(2) was not met in relation to that property immediately before 30 October 2024, and
(c) the condition in subsection (2)(b) of this section would have been met if the transferor’s interest condition had been met in relation to that property at that time.
(1) This section applies for the purpose of determining the amount of the 100% trust relief allowance available in relation to an occasion on which tax is charged under a special trust charging provision for the purposes of—
(a) section 104(1B) (business property relief), and
(b) section 116(1B) (agricultural property relief).
(2) The 100% trust relief allowance available in relation to an occasion on which tax is charged under a special trust charging provision (“the relevant occasion”) in relation to a settlement (“the relevant settlement”) is equal to—
(a) £2.5 million, less,
(b) the total amount by which the values charged on occasions on which tax was charged under that special trust charging provision in relation to the relevant settlement before the day on which the relevant occasion occurred were treated as reduced as a result of section 104(1B) or 116(1B).
(3) But where—
(a) more than one conditionally relievable occasion in relation to the relevant settlement and that special trust charging provision occurs on the same day, and
(b) the sum of the potentially relievable values in relation to those occasions exceeds the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day,
the 100% trust relief allowance available in relation to those occasions is to be determined under subsection (4) (instead of under subsection (2)).
(4) The 100% trust relief allowance available in relation to each of those occasions is the amount given by multiplying—
(a) the amount given by dividing the potentially relievable value in relation to that occasion by the sum of the potentially relievable values in relation to each of those occasions, by
(b) the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day.
(5) For the purposes of this section—
(a) a “conditionally relievable occasion”, in relation to the relevant settlement and a special trust charging provision, means an occasion—
(i) on which tax is charged under that provision, and
(ii) on which section 104(1B) or 116(1B) would apply to reduce the value charged if there were an amount of the 100% trust relief allowance available in relation to it,
(b) the potentially relievable value, in relation to an occasion on which tax is charged under a special trust charging provision, is so much of the value as otherwise would have been charged on that occasion as would be treated as reduced as a result of section 104(1B) or 116(1B) if the 100% trust relief allowance available in relation to it were unlimited, and
(c) a special trust charging provision means—
(i) section 70 (property leaving temporary charitable trusts),
(ii) section 71 (accumulation and maintenance trusts),
(iii) section 71B (trusts for bereaved minors),
(iv) section 72 (property leaving employee trusts and newspaper trusts),
(v) section 73 (pre-1978 protective trusts),
(vi) section 74 (pre-1981 trusts for disabled persons), or
(vii) paragraph 8 of Schedule 4 (maintenance funds for historic buildings).
(1) This section applies for the purpose of determining the amount of the 100% trust relief allowance available in relation to an occasion on which tax is charged under section 71E(1)(a) (charge on age 18-to-25 trusts) in relation to a settlement (“the relevant settlement”) and a beneficiary of that settlement (“B”) for the purposes of—
(a) section 104(1B) (business property relief), and
(b) section 116(1B) (agricultural property relief).
(2) There is no 100% trust relief allowance available in relation to an occasion on which tax is charged under section 71E(1)(b).
(3) The 100% trust relief allowance available in relation to an occasion on which tax is charged under section 71E(1)(a) (“the relevant occasion”) in relation to the relevant settlement and B is equal to—
(a) the 18-25 trust allowance in relation to the relevant settlement and B, less,
(b) the total amount by which the values charged on occasions on which tax was charged under that section in relation to the relevant settlement and B before the day on which the relevant occasion occurred were treated as reduced as a result of section 104(1B) or 116(1B).
(4) The 18-to-25 trust allowance in relation to the relevant settlement and B is—
(a) where there is only one qualifying settlement, £2.5 million, or
(b) where there is more than one qualifying settlement, £2.5 million divided by the number of qualifying settlements.
(5) For the purposes of subsection (4), a settlement is a qualifying settlement—
(a) if it is the relevant settlement, or
(b) where the relevant settlement was made by a parent of B on their death on or after 30 October 2024, if it is another settlement—
(i) of which B is a beneficiary,
(ii) to which section 71D applies, and
(iii) that was made by the same parent of B on their death.
(6) But where—
(a) more than one conditionally relievable occasion in relation to the relevant settlement and B occurs on the same day, and
(b) the sum of the potentially relievable values in relation to those occasions exceeds the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day,
the 100% trust relief allowance available in relation to those occasions is to be determined under subsection (7) (instead of under subsection (3)).
(7) The 100% trust relief allowance available in relation to each of those occasions is the amount given by multiplying—
(a) the amount given by dividing the potentially relievable value in relation to that occasion by the sum of the potentially relievable values in relation to each of those occasions, by
(b) the amount of the 100% trust relief allowance that would have been available in relation to a conditionally relievable occasion occurring on that same day, if no other such occasion had occurred on that day.
(8) For the purposes of this section—
(a) a “conditionally relievable occasion”, in relation to the relevant settlement and B, means an occasion—
(i) on which tax is charged under section 71E(1)(a) (charge on age 18-to-25 trusts) in relation to the settlement and B, and
(ii) on which section 104(1B) or 116(1B) would apply to reduce the value charged if there were an amount of the 100% trust relief allowance available in relation to the settlement and B,
(b) the potentially relievable value, in relation to an occasion on which tax is charged under section 71E(1)(a) in relation to the relevant settlement and B, is so much of the value as otherwise would have been charged on that occasion as would be treated as reduced as a result of section 104(1B) or 116(1B) if the 100% trust relief allowance available in relation to it were unlimited, and
(c) “parent” has the meaning given by section 71H.
(1) This section applies where—
(a) part of the value of a person’s estate immediately before his death is attributable to the value of land in the United Kingdom ... on which trees or underwood are growing but which is not agricultural property within the meaning of Chapter II of this Part of this Act, and
(b) either he was beneficially entitled to the land throughout the five years immediately preceding his death, or he became beneficially entitled to it otherwise than for a consideration in money or money’s worth.
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Where this section applies and the person liable for the whole or part of the tax so elects—
(a) the value of the trees or underwood shall be left out of account in determining the value transferred on the death, but
(b) tax shall be charged in the circumstances mentioned in section 126 below.
(3) An election under this section must be made by notice in writing to the Board within two years of the death or such longer time as the Board may allow.
126 Charge to tax on disposal of trees or underwood.
(1) Where under section 125 above the value of any trees or underwood has been left out of account in determining the value transferred on the death of any person, and the whole or any part of the trees or underwood is disposed of (whether together with or apart from the land on which they were growing) then, if the disposal occurs before any part of the value transferred on the death of any other person is attributable to the value of that land, tax shall be charged in accordance with sections 127 and 128 below.
(2) Subsection (1) above shall not apply to a disposal made by any person to his spouse or civil partner .
(3) Where tax has been charged under this section on the disposal of any trees or underwood tax shall not again be charged in relation to the same death on a further disposal of the same trees or underwood.
(1) The amount on which tax is charged under section 126 above on a disposal of trees or underwood shall be—
(a) if the disposal is a sale for full consideration in money or money’s worth, an amount equal to the net proceeds of the sale, and
(b) in any other case, an amount equal to the net value of the trees or underwood at the time of the disposal.
(2) Where, if the value of the trees or underwood had not been left out of account in determining the value transferred on the death of the person in question—
(a) it would have been taken into account in determining the value of any relevant business property for the purposes of relief under Chapter I of this Part of this Act in relation to the transfer of value made on his death, or
(b) it would have been so taken into account if this Act had then been in force,
the amount on which tax is charged under section 126 above shall be reduced by 50 per cent.
(1) Tax charged under section 126 above on an amount determined under section 127 above shall be charged at the rate or rates at which it would have been charged on the death first mentioned in section 126 if—
(a) that amount, and any amount on which tax was previously charged under section 126 in relation to that death, had been included in the value transferred on death, and
(b) the amount on which the tax is charged had formed the highest part of that value.
(2) In determining for the purposes of subsection (1) the rate or rates at which tax would have been charged on the amount determined under section 127, the effect of Schedule 1A (if it would have applied) is to be disregarded.
Where a disposal on which tax is chargeable under section 126 above is a chargeable transfer, the value transferred by it shall be calculated as if the value of the trees or underwood had been reduced by the tax chargeable under that section.
(1) In this Chapter—
(a) references to the value transferred on a death are references to the value transferred by the chargeable transfer made on that death;
(b) references to the net proceeds of sale or the net value of any trees or underwood are references to the proceeds of sale or value after deduction of any expenses allowable under this Chapter so far as those expenses are not allowable for the purposes of income tax; and
(c) references to the disposal of any trees or underwood include references to the disposal of any interest in the trees or underwood (and references to a disposal of the same trees or underwood shall, where the case so requires, be construed as referring to a disposal of the same interest).
(2) The expenses allowable under this Chapter are, in relation to any trees or underwood the value of which has been left out of account on any death,—
(a) the expenses incurred in disposing of the trees or underwood; and
(b) the expenses incurred in replanting within three years of a disposal (or such longer time as the Board may allow) to replace the trees or underwood disposed of; and
(c) the expenses incurred in replanting to replace trees or underwood previously disposed of, so far as not allowable on the previous disposal.
(1) Subject to section 132 below, this section applies where because of the transferor’s death within seven years of the transfer, tax becomes chargeable in respect of the value transferred by a potentially exempt transfer or (by virtue of section 7(4) above) additional tax becomes chargeable in respect of the value transferred by any other chargeable transfer and (in either case) all or part of the value transferred is attributable to the value of property (“the transferred property”) which—
(a) is, at the date of the death, the property of the person (“the transferee”) whose property it became on the transfer or of his spouse or civil partner , or
(b) has, before that date, been sold by the transferee or his spouse or civil partner by a qualifying sale;
and in the following provisions of this section “the relevant date” means, in a case within paragraph (a) above, the date of the death, and in a case within paragraph (b), the date of the qualifying sale.
(2) If—
(a) the market value of the transferred property at the time of the chargeable transfer exceeds its market value on the relevant date, and
(b) a claim is made by a person liable to pay the whole or part of the tax or, as the case may be, additional tax,
the tax or, as the case may be, additional tax shall be calculated as if the value transferred reflected the market value of the transferred property on the relevant date, rather than its market value at the time of the chargeable transfer.
(2ZA) A claim under subsection (2)(b) must be made not more than 4 years after the transferor's death.
(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) A sale is a qualifying sale for the purposes of this section if—
(a) it is at arm’s length for a price freely negotiated at the time of the sale, and
(b) no person concerned as vendor (or as having an interest in the proceeds of the sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase), and
(c) no provision is made, in or in connection with the agreement for the sale, that the vendor (or any person having an interest in the proceeds of sale) is to have any right to acquire some or all of the property sold or some interest in or created out of it.
(1) Section 131 above shall not apply if the transferred property is tangible movable property that is a wasting asset.
(2) The transferred property is a wasting asset for the purposes of this section if, immediately before the chargeable transfer, it had a predictable useful life not exceeding fifty years, having regard to the purpose for which it was held by the transferor; and plant and machinery shall in every case be regarded as having a predictable useful life of less than fifty years.
(1) If the transferred property consists of shares and at any time before the relevant date the transferee or his spouse or civil partner becomes entitled to a capital payment is respect of them, then for the purposes of section 131 above the market value of the transferred property on the relevant date shall (except where apart from this section it reflects a right to the payment) be taken to be increased by an amount equal to the payment.
(2) If at any time before the relevant date the transferee or his spouse or civil partner receives or becomes entitled to receive in respect of the transferred property a provisional allotment of shares and disposes of the rights, the amount of the consideration for the disposal shall be treated for the purposes of this section as a capital payment in respect of the transferred property.
(3) In this section “capital payment” means any money or money’s worth which does not constitute income for the purposes of income tax.
If the transferred property consists of shares and at any time before the relevant date the transferee or his spouse or civil partner becomes liable to make a payment in pursuance of a call in respect of them, then for the purposes of section 131 above the market value of the transferred property on the relevant date shall (except where apart from this section it reflects the liability) be taken to be reduced by an amount equal to the payment.
(1) This section has effect where the transferred property consists of shares in relation to which there occurs before the relevant date a transaction to which 127 of the 1992 Act applies or would apply but for section 134 of that Act, that is to say—
(a) a reorganisation within the meaning of section 126(1) of that Act,
(b) the conversion of securities within the meaning of section 132 of that Act,
(c) the issue by a company of shares in exchange for shares in another company in such circumstances that section 135 of that Act applies, or
(d) the issue by a company of shares under such an arrangement as is referred to in section 136of that Act,
or any transaction relating to a unit trust scheme which corresponds to any of the transactions referred to in paragraph (a) to (d) above and to which section 127 of that Act applies by virtue of section 99 of that Act.
(2) In the following provisions of this section “the original shares” and “the new holding” shall be construed in accordance with section 126(1).
(3) Where this section has effect the original shares and the new holding shall be treated as the same property for the purposes of this Chapter.
(4) Where this section has effect and, as part of or in connection with the transaction concerned, the transferee or his spouse or civil partner becomes liable to give any consideration for the new holding or any part of it, then for the purposes of section 131 above the market value of the transferred property on the relevant date shall (except where apart from this section it reflects the liability) be taken to be reduced by an amount equal to that consideration.
(5) For the purposes of subsection (4) above, there shall not be treated as consideration given for the new holding or any part of it—
(a) any surrender, cancellation or other alteration of any of the original shares or of the rights attached thereto, or
(b) any consideration consisting of any application, in paying up the new holding or any part of it, of assets of the company concerned or of any dividend or other distribution declared out of those assets but not made.
(1) This section applies where the transferred property consists of shares in a close company and at any time after the chargeable transfer and before the relevant date there is a relevant transaction in relation to the shares; and for this purpose “relevant transaction” means a transaction which is—
(a) the making of a transfer of value by the company, or
(b) an alteration in so much of the company’s share or loan capital as does not consist of quoted shares or an alteration in any rights attaching to unquoted shares in or unquoted debentures of the company,
but which does not give rise to an adjustment, under any of the preceding sections of this Chapter, in the market value of the transferred property on the relevant date.
(2) Subject to subsections (3) and (4) below, where this section applies the market value of the transferred property on the relevant date shall for the purposes of section 131 above be taken to be increased by an amount equal to the difference between—
(a) the market value of the transferred property at the time of the chargeable transfer, and
(b) what that value would have been if the relevant transaction had occurred before rather than after that time.
(3) Where the relevant transaction is the making by the company of a transfer of value by which the value of the estate of the person who made the chargeable transfer or, if his spouse or civil partner is a long-term UK resident, his spouse or civil partner is increased by any amount, the increase provided for by subsection (2) above shall be reduced by that amount.
(4) Where the market value of the transferred property at the time of the chargeable transfer is less than it would have been as mentioned in subsection (2) above, that subsection shall apply as if, instead of providing for an increase, it provided for the market value on the relevant date to be reduced to what it would have been if the relevant transaction had not occurred.
(1) Where the transferred property is an interest in land in relation to which the conditions mentioned in subsection (2) below are not satisfied, then, subject to subsections (3) and (4) below, the market value of the transferred property on the relevant date shall for the purposes of section 131 above be taken to be increased by an amount equal to the difference between—
(a) the market value of the interest at the time of the chargeable transfer, and
(b) what that market value would have been if the circumstances prevailing on the relevant date and by reason of which the conditions are not satisfied had prevailed at the time of the chargeable transfer.
(2) The conditions referred to in subsection (1) above are—
(a) that the interest was the same in all respects and with the same incidents at the time of the chargeable transfer and on the relevant date, and
(b) that the land in which the interest subsists was in the same state and with the same incidents at the time of the chargeable transfer and on the relevant date.
(3) If after the date of the chargeable transfer but before the relevant date compensation becomes payable under any enactment to the transferee or his spouse or civil partner—
(a) because of the imposition of a restriction on the use or development of the land in which the interest subsists, or
(b) because the value of the interest is reduced for any other reason,
the imposition of the restriction or the other cause of the reduction in value shall be ignored for the purposes of subsections (1) and (2) above, but the market value of the interest on the relevant date shall be taken to be increased by an amount equal to the amount of the compensation.
(4) Where the market value of the interest at the time of the chargeable transfer is less than it would have been as mentioned in subsection (1) above, that subsection shall apply as if, instead of providing for an increase, it provided for the market value on the relevant date to be reduced to what it would have been if the change in circumstances by reason of which the conditions mentioned in subsection (2) above are not satisfied had not occurred.
(1) Where the transferred property is the interest of a lessee under a lease the duration of which at the time of the chargeable transfer does not exceed fifty years, then for the purposes of section 131 above the market value of the interest on the relevant date shall be taken to be increased by an amount equal to the appropriate fraction of the market value of the interest at the time of the chargeable transfer.
(2) In subsection (1) above, “the appropriate fraction” means the fraction—
P
(
1
)
-
P
(
2
)
P
(
1
)
where
P(1) is the percentage that would be derived from the Table in paragraph 1 of Schedule 8 to the 1992 Actfor the duration of the lease at the time of the chargeable transfer, and
P(2) is the percentage that would be so derived for the duration of the lease on the relevant date.
(1) Where the transferred property is neither shares nor an interest in land and the condition mentioned in subsection (2) below is not satisfied in relation to it, then, subject to subsections (3) and (4) below, the market value of the property on the relevant date shall for the purposes of section 131 above be taken to be increased by an amount equal to the difference between—
(a) the market value of the property at the time of the chargeable transfer, and
(b) what that value would have been if the circumstances prevailing at the relevant date and by reason of which the condition is not satisfied had prevailed at the time of the chargeable transfer.
(2) The condition referred to in subsection (1) above is that the transferred property was the same in all respects at the time of the chargeable transfer and on the relevant date.
(3) Where the market value of the transferred property at the time of the chargeable transfer is less than it would have been as mentioned in subsection (1) above, that subsection shall apply as if, instead of providing for an increase, it provided for the market value on the relevant date to be reduced to what it would have been if the property had remained the same in all respects as it was at the time of the chargeable transfer.
(4) Where the transferred property is neither shares nor an interest in land and during the period between the time of the chargeable transfer and the relevant date benefits in money or money’s worth are derived form it which exceed a reasonable return on its market value at the time of the chargeable transfer, then—
(a) any effect of the benefits on the transferred property shall be ignored for the purposes of the preceding provisions of this section, but
(b) the market value of the transferred property on the relevant date shall be taken for the purposes of section 131 above to be increased by an amount equal to the said excess.
(1) In this Chapter—
“close company” has the same meaning as in Part IV of this Act;
“interest in land” does not include any estate, interest or right by way of mortgage or other security;
“shares” includes securities;
and “the relevant date”, “the transferee” and “the transferred property” shall be construed in accordance with section 131(1) above.
(2) For the purposes of this Chapter the market value at any time of any property is the price which the property might reasonably be expected to fetch if sold in the open market at that time; but—
(a) that price shall not be assumed to be reduced on the ground that the whole property is on the market at one and the same time, and
(b) in the case of unquoted shares, it shall be assumed that in that market there is available to any prospective purchaser of the shares all the information which a prudent prospective purchaser might reasonably require if he were proposing to purchase them from a willing vendor by private treaty and at arm’s length.
(1) Where the value of a person’s estate was increased by a chargeable transfer (“the first transfer”) made not more than five years before—
(a) his death, or
(b) a chargeable transfer which is made by him otherwise than on his death and as to which the conditions specified in subsection (2) below are satisfied,
the tax chargeable on the value transferred by the transfer made on his death or, as the case may be, referred to in paragraph (b) above (“the later transfer”) shall be reduced by an amount calculated in accordance with subsection (3) below.
(2) The conditions referred to in subsection (1)(b) above are—
(a) that the value transferred by the later transfer falls to be determined by reference to the value of settled property in which there subsists an interest in possession to which the transferor is entitled;
(b) that the value transferred by the first transfer also fell to be determined by reference to the value of that property; and
(c) that the first transfer either was or included the making of the settlement or was made after the making of the settlement.
(3) The amount referred to in subsection (1) above is a percentage of the tax charged on so much of the value transferred by the first transfer as is attributable to the increase mentioned in that subsection; and the percentage is—
(a) 100 per cent. if the period beginning with the date of the first transfer and ending with the date of the later does not exceed one year;
(b) 80 per cent. if it exceeds one year but does not exceed two years;
(c) 60 per cent. if it exceeds two years but does not exceed three years;
(d) 40 per cent. if it exceeds three years but does not exceed four years; and
(e) 20 per cent. if it exceeds four years.
(4) Where in relation to the first transfer there is more than one later transfer, the reduction provided for by this section shall be given only in respect of the earliest of them, unless the reduction represents less than the whole of the tax charged as mentioned in subsection (3) above; and in that case a reduction may be made in respect of subsequent transfers (in chronological order) until reductions representing the whole of that tax have been made.
(5) For the purposes of subsection (4) above, a reduction made in accordance with paragraph (a) of subsection (3) above represents an equivalent amount of tax, a reduction made in accordance with paragraph (b) represents the amount of tax of which it is 80 per cent., and so on.
(6) In determining for the purposes of this section whether or to what extent the value of the transferor’s estate was increased by a chargeable transfer, there shall be disregarded any excluded property consisting of a reversionary interest to which he became entitled on the occasion of or before the chargeable transfer.
(7) Where—
(a) the value of the transferor’s estate was increased in consequence of—
(i) a gift inter vivos, or
(ii) a disposition or determination of a beneficial interest in possession in property comprised in a settlement, and
(b) tax under section 22(5) of the Finance Act 1975 was by reason of the gift or interest payable on a subsequent death,
this section shall apply as if the increase had been by the chargeable transfer made on the occasion of the death.
(1) This section applies if any part of the value transferred by the later transfer qualifies for the lower rate of tax in accordance with Schedule 1A.
(2) The amount of the reduction made under section 141(1) is to be apportioned in accordance with this section.
(3) For each qualifying component, the tax chargeable on so much of the value transferred by the later transfer as is attributable to property in that component (“the relevant part of the tax”) is to be reduced by the appropriate proportion of the amount calculated in accordance with section 141(3).
(4) “The appropriate proportion” is a proportion equal to the proportion that—
(a) the relevant part of the tax, bears to
(b) the tax chargeable on the value transferred by the later transfer as a whole.
(5) If parts of an estate are treated under Schedule 1A as a single component, subsection (3) applies to the single component (and not to individual components forming part of the deemed single component).
(6) If, after making the reductions required by subsection (3), there remains any part of the tax chargeable on the value transferred by the later transfer that has not been reduced, the remaining part of the tax is to be reduced by so much of the amount calculated in accordance with section 141(3) as has not been used up for the purposes of making the reductions required by subsection (3).
(7) In this section—
“component” means a component of the estate, as defined in paragraph 3 of Schedule 1A;
“the later transfer” has the meaning given in section 141(1);
“qualifying component” means a component (or deemed single component) for which the donated amount is at least 10% of the baseline amount, as determined in accordance with Schedule 1A.
142 Alteration of dispositions taking effect on death.
(1) Where within the period of two years after a person’s death—
(a) any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or
(b) the benefit conferred by any of those dispositions is disclaimed,
by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions, this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.
(2) Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation.
(2A) For the purposes of subsection (2) above the relevant persons are—
(a) the person or persons making the instrument, and
(b) where the variation results in additional tax being payable, the personal representatives.
Personal representatives may decline to make a statement under subsection (2) above only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax.
(3) Subsection (1) above shall not apply to a variation or disclaimer made for any consideration in money or money’s worth other than consideration consisting of the making, in respect of another of the dispositions, of a variation or disclaimer to which that subsection applies.
(3A) Subsection (1) does not apply to a variation by virtue of which any property comprised in the estate immediately before the person's death becomes property in relation to which section 23(1) applies unless it is shown that the charity or registered club to which the property is given has been notified of the existence of the instrument of variation.
(3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Where a variation to which subsection (1) above applies results in property being held in trust for a person for a period which ends not more than two years after the death, this Act shall apply as if the disposition of the property that takes effect at the end of the period had had effect from the beginning of the period; but this subsection shall not affect the application of this Act in relation to any distribution or application of property occurring before that disposition takes effect.
(5) For the purposes of subsection (1) above the property comprised in a person’s estate includes any excluded property but not any property to which he is treated as entitled by virtue of section 49(1) above or section 102 of the Finance Act 1986.
(6) Subsection (1) above applies whether or not the administration of the estate is complete or the property concerned has been distributed in accordance with the original dispositions.
(7) In the application of subsection (4) above to Scotland, property which is subject to a proper liferent shall be deemed to be held in trust for the liferenter.
Where a testator expresses a wish that property bequeathed by his will should be transferred by the legatee to other persons, and the legatee transfers any of the property in accordance with that wish within the period of two years after the death of the testator, this Act shall have effect as if the property transferred had been bequeathed by the will to the transferee.
144 Distribution etc. from property settled by will.
(1) Subsection (2) below applies where property comprised in a person’s estate immediately before his death is settled by his will and, within the period of two years after his death and before any interest in possession has subsisted in the property, there occurs—
(a) an event on which tax would (apart from subsection (2) below) be chargeable under any provision, other than section 64 or 79, of Chapter III of Part III of this Act, or
(b) an event on which tax would be so chargeable but for section 65(4), 75 , 75A or 76 above or paragraph 16(1) of Schedule 4 to this Act.
(1A) Where the testator dies on or after 22nd March 2006, subsection (1) above shall have effect as if the reference to any interest in possession were a reference to any interest in possession that is—
(a) an immediate post-death interest, or
(b) a disabled person's interest.
(2) Where this subsection applies by virtue of an event within paragraph (a) of subsection (1) above, tax shall not be charged under the provision in question on that event; and in every case in which this subsection applies in relation to an event, this Act shall have effect as if the will had provided that on the testator’s death the property should be held as it is held after the event.
(3) Subsection (4) below applies where—
(a) a person dies on or after 22nd March 2006,
(b) property comprised in the person's estate immediately before his death is settled by his will, and
(c) within the period of two years after his death, but before an immediate post-death interest or a disabled person's interest has subsisted in the property, there occurs an event that involves causing the property to be held on trusts that would, if they had in fact been established by the testator's will, have resulted in—
(i) an immediate post-death interest subsisting in the property, or
(ii) section 71A or 71D above applying to the property.
(4) Where this subsection applies by virtue of an event—
(a) this Act shall have effect as if the will had provided that on the testator's death the property should be held as it is held after the event, but
(b) tax shall not be charged on that event under any provision of Chapter 3 of Part 3 of this Act.
(5) Subsection (4) above also applies where—
(a) a person dies before 22nd March 2006,
(b) property comprised in the person's estate immediately before his death is settled by his will,
(c) an event occurs—
(i) on or after 22nd March 2006, and
(ii) within the period of two years after the testator's death,
that involves causing the property to be held on trusts within subsection (6) below,
(d) no immediate post-death interest, and no disabled person's interest, subsisted in the property at any time in the period beginning with the testator's death and ending immediately before the event, and
(e) no other interest in possession subsisted in the property at any time in the period beginning with the testator's death and ending immediately before 22nd March 2006.
(6) Trusts are within this subsection if they would, had they in fact been established by the testator's will and had the testator died at the time of the event mentioned in subsection (5)(c) above, have resulted in—
(a) an immediate post-death interest subsisting in the property, or
(b) section 71A or 71D above applying to the property.
146 Inheritance (Provision for Family and Dependants) Act 1975.
(1) Where an order is made under section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) in relation to any property forming part of the net estate of a deceased person, then, without prejudice to section 19(1) of that Act, the property shall for the purposes of this Act be treated as if it had on his death devolved subject to the provisions of the order.
(2) Where an order is made under section 10 of the 1975 Act requiring a person to provide any money or other property by reason of a disposition made by the deceased, then—
(a) if that disposition was a chargeable transfer and the personal representatives of the deceased make a claim for the purpose not more than 4 years after the date on which the order is made—
(i) tax paid or payable on the value transferred by that chargeable transfer (whether or not by the claimants) shall be repaid to them by the Board or, as the case may be, shall not be payable, and
(ii) the rate or rates of tax applicable to the transfer of value made by the deceased on his death shall be determined as if the values previously transferred by chargeable transfers made by him were reduced by that value;
(b) the money or property shall be included in the deceased’s estate for the purpose of the transfer of value made by him on his death.
(3) Where the money or other property ordered to be provided under section 10 of the 1975 Act is less than the maximum permitted by that section, subsection (2)(a) above shall have effect in relation to such part of the value there mentioned as is appropriate.
(4) The adjustment in consequence of the provisions of this section or of section 19(1) of the 1975 Act of the tax payable in respect of the transfer of value made by the deceased on his death shall not affect—
(a) the amount of any deduction to be made under section 8 of that Act in respect of tax borne by the person mentioned in subsection (3) of that section, or
(b) the amount of tax to which regard is to be had under section 9(2) of that Act;
and where a person is ordered under that Act to make a payment or transfer property by reason of his holding property treated as part of the deceased’s net estate under section 8 or 9 and tax borne by him is taken into account for the purposes of the order, any repayment of that tax shall be made to the personal representatives of the deceased and not to that person.
(5) Tax repaid under paragraph (a)(i) of subsection (2) above shall be included in the deceased’s estate for the purposes of the transfer of value made by him on his death; and tax repaid under that paragraph or under subsection (4) above shall form part of the deceased’s net estate for the purposes of the 1975 Act.
(6) Anything which is done in compliance with an order under the 1975 Act or occurs on the coming into force of such an order, and which would (apart from this subsection) consistitute an occasion on which tax is chargeable under any provision, other than section 79, of Chapter III of Part III of this Act, shall not constitute such an occasion; and where an order under the 1975 Act provides for property to be settled or for the variation of a settlement, and (apart from this subsection) tax would be charged under section 52(1) above on the coming into force of the order, section 52(1) shall not apply.
(7) In subsections (2)(a) and (5) above references to tax include references to interest on tax.
(8) Where an order is made staying or dismissing proceedings under the 1975 Act on terms set out in or scheduled to the order, this section shall have effect as if any of those terms which could have been included in an order under section 2 or 10 of that Act were provisions of such an order.
(9) In this section any reference to, or to any provision of, the 1975 Act includes a reference to, or to the corresponding provision of, the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979.
(1) Where a testator dies leaving a surviving spouse or civil partner and a person under the age of 18 entitled to claim legitim or rights under section 131 of the Civil Partnership Act 2004 (“section 131 rights”), and provision is made in his will or other testamentary document for a disposition to his spouse or civil partner which, if it could take effect, would leave insufficient property in the estate to satisfy the entitlement of that person in respect of legitim or to section 131 rights , the following provisions of this section shall apply.
(2) Subject to subsections (3) and (4) below, tax shall be charged at the testator’s death as if the disposition to the spouse or civil partner did not include any amount in respect of legitim or section 131 rights , but if within the period mentioned in subsection (6) below the person or persons concerned renounce their claim to legitim or section 131 rights , tax shall be repaid to the estate calculated on the basis that the disposition to the spouse or civil partner did include the amount renounced.
(3) The executors or judicial factor of the testator may, in accordance with the provisions of this section, elect that subsection (2) above shall not apply but that subsection (4) below shall apply.
(4) Tax shall be charged at the testator’s death as if the disposition to the spouse or civil partner had taken effect, but where the person or persons concerned claim legitim or section 131 rights within the period mentioned in subsection (6) below, tax shall be charged on the amount so claimed calculated on the basis that the legitim fund had been paid out in full at the testator’s death (excluding any part of the fund renounced before any claim has been made) or on the basis that all section 131 rights had been claimed in full at the testator's death (excluding any rights renounced before any claim has been made) and the tax chargeable thereon had been apportioned rateably among the persons entitled to claim legitim or section 131 rights(excluding any who have renounced as aforesaid).
(5) Where the executors or judicial factor of the testator decide to make an election under subsection (3) above they shall give notice in writing of that election to the Board within two years from the date of death of the testator or such longer period as the Board may permit.
(6) For the purposes of subsections (2) and (4) above, a person shall be treated as having claimed legitim or section 131 rights unless he has renounced his claim before attaining the age of 18 or he renounces his claim within two years of his attaining that age or such longer period as the Board may permit.
(7) Where a person dies before attaining the age of 18 or before making a renunciation under subsection (6) above the provisions of this section shall apply in relation to that person’s executors or judicial factor as they would have applied in relation to that person if that person had attained the age of 18 with the substitution of the date of death of that person for the date on which a person attained that age; but where the executors or factor renounce a claim to legitim or section 131 rights in respect of a person the amount renounced shall not be treated as part of that person’s estate.
(8) Where subsection (2) above applies in relation to any estate, then notwithstanding anything in section 241 below the Board may repay tax under that subsection without limit of time.
(9) Where subsection (4) above applies in relation to any estate, then notwithstanding anything in section 239 below a certificate of discharge may be given under that section in respect of the whole estate, and notwithstanding anything in section 240 below the giving of the certificate shall not preclude the Board from claiming tax under subsection (4) above without limit of time.
(10) Where the application of subsection (4) in relation to the estate of a person means that too great an increase has been made under subsection (3) of section 8A above in the case of another person, the claim under that section in that case may be amended accordingly by the Commissioners for Her Majesty's Revenue and Customs.
(1) Where on a claim made for the purpose it is shown that the whole or any part of a chargeable transfer (“the relevant transfer”) has by virtue of any enactment or rule of law been set aside as voidable or otherwise defeasible—
(a) tax paid or payable by the claimant (in respect of the relevant transfer or any other chargeable transfer made before the claim) that would not have been payable if the relevant transfer had been void ab initio shall be repaid to him by the Board, or as the case may be shall not be payable, and
(b) the rate or rates of tax applicable to any chargeable transfer made after the claim by the person who made the relevant transfer shall be determined as if that transfer or that part of it had been void as aforesaid.
(2) In subsection (1)(a) above the reference to tax includes a reference to interest on tax.
(3) A claim under this section must be made not more than 4 years after the claimant knew, or ought reasonably to have known, that the relevant transfer has been set aside.
150A Certain pension interests treated as part of estate
(1) For the purposes of this Act a member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is treated as beneficially entitled immediately before their death to property (“notional pension property”) by reference to the arrangements under the scheme as they stand at that time.
(2) The value of the member’s notional pension property in relation to the scheme is calculated as follows—
Step 1
For each money purchase arrangement under the scheme add together—
the value of any property that—
is held in a pension pot, and
may or must be used to provide benefits under the arrangement on the death of the member, and
the value of any property that—
is not held in a pension pot, and
may be and can reasonably be expected to be used to provide benefits under the arrangement on the death of the member,
then deduct the value of any property within paragraph (a) or (b) that may only be used to provide an excluded benefit.
Step 2
For each defined benefits arrangement under the scheme add together—
the amount of any benefit that must be paid as a lump sum death benefit under the arrangement on the death of the member,
the amount of any benefit not within paragraph (a) that may be and can reasonably be expected to be paid as a lump sum death benefit under the arrangement on the death of the member, and
the amount of any benefit that may be and, assuming that the maximum amount possible is paid as a lump sum death benefit, can reasonably be expected to be paid as a scheme continuation payment under the arrangement on the death of the member,
then deduct the amount of any benefit within paragraph (a), (b) or (c) that may only be paid as an excluded benefit.
Step 3
Add together each of the amounts given at Steps 1 and 2.
(3) In determining for the purposes of subsection (2) any question as to what can reasonably be expected, regard is to be had (in particular) to appropriate actuarial assumptions.
(4) Except under this section, no interest in or under a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is taken into account for the purposes of this Act in determining the value of the estate of a member of the scheme immediately before their death.
(5) For the purposes of section 6 (excluded property), notional pension property in relation to a pension scheme is regarded as situated in the country or territory in which the scheme is established.
(6) In subsection (2)—
“excluded benefit”, in relation to a pension scheme, means a benefit that may only be paid under the scheme as one or more of the following—
a dependants’ scheme pension;
a trivial commutation lump sum death benefit whose payment to a person extinguishes the person’s entitlement to a dependants’ scheme pension;
a dependants’ annuity, or a nominees’ annuity, that was purchased together with a lifetime annuity payable to the member (and for that purpose “purchased together” is to be construed in accordance with paragraphs 17(1A) and 27AA(2) of Schedule 28 to the Finance Act 2004);
any amount that—
is payable as a benefit (in any form) in respect of a member of the scheme if the member is in employment or other work of a particular description immediately before their death, and
is not payable as a benefit (in any form) in respect of a member of the scheme if the member does not meet those conditions;
“held in a pension pot” means available for the purpose of providing benefits to or in respect of one specific member of the scheme;
“scheme continuation payment” means a payment made—
in relation to a registered pension scheme, in accordance with pension rule 2 in section 165(1) of the Finance Act 2004 (continuing payments after death);
in relation to a qualifying non-UK pension scheme or a section 615(3) scheme, in such a way as would be in accordance with that rule if the scheme in question were a registered pension scheme.
(7) Each of the following has the same meaning in this section as in Part 4 of the Finance Act 2004 (pension schemes etc)—
“arrangement” (see section 152(1) of that Act);
“defined benefits arrangement” (see section 152(6) of that Act);
“dependants’ annuity” (see paragraph 17 of Schedule 28 to that Act);
“dependants’ scheme pension” (see paragraph 16 of Schedule 28 to that Act);
“lifetime annuity” (see paragraph 3 of Schedule 28 to that Act);
“lump sum death benefit” (see section 168(2) of that Act);
“money purchase arrangement” (see section 152(2) of that Act);
“nominees’ annuity” (see paragraph 27AA of Schedule 28 to that Act);
“trivial commutation lump sum death benefit” (see paragraph 20 of Schedule 29 to that Act);
but for the purposes of this section those definitions are to be read with any necessary modifications in applying them to a qualifying non-UK pension scheme or a section 615(3) scheme.
151 Treatment of pension rights, etc. Other provision about pension interests
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) An interest in or under a registered pension scheme , a qualifying non-UK pension scheme or a section 615(3) scheme which comes to an end on the death of the person entitled to it shall be left out of account in determining for the purposes of this Act the value of his estate immediately before his death, if the interest—
(a) is, or is a right to, a pension or annuity, and
(b) is not an interest resulting (whether by virtue of the instrument establishing the scheme or otherwise) from the application of any benefit provided under the scheme otherwise than by way of a pension or annuity.
(3) Sections 49 to 53 above shall not apply in relation to an interest satisfying the conditions of paragraphs (a) and (b) of subsection (2) above.
(3) Sections 49 to 53 (holder of interest in possession treated as directly entitled to property in which interest subsists etc) do not apply in relation to an interest in possession in property where the property is held for the purposes of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme.
(4) In relation to an interest in or under a registered pension scheme , a qualifying non-UK pension scheme or a section 615(3) scheme, section 5(2) above shall apply as if the words “other than settled property” were omitted (in both places).
(5) Where a benefit has become payable under a registered pension scheme , a qualifying non-UK pension scheme or a section 615(3) scheme, and the benefit becomes comprised in a settlement made by a person other than the person entitled to the benefit, the settlement shall for the purposes of this Act be treated as made by the person so entitled.