Inheritance Tax Act 1984

[F1 8FA Downsizing addition: entitlement: low-value death interest in home U.K.

(1) There is entitlement to a downsizing addition in calculating the person's residence nil-rate amount if each of conditions A to F is met (see subsection (8) for the amount of the addition).

(2) Condition A is that—

(a) the person's residence nil-rate amount is given by section 8E(2) or (4), or

(b) the person's estate immediately before the person's death includes a qualifying residential interest but none of the interest is closely inherited, and—

(i) where E is less than or equal to TT, so much of [F2 the value transferred by the transfer of value under section 4 on the person’s death] as is attributable to the person's qualifying residential interest is less than the person's default allowance, or

(ii) where E is greater than TT, so much of [F2 the value transferred by the transfer of value under section 4 on the person’s death] as is attributable to the person's qualifying residential interest is less than the person's adjusted allowance.

Section 8E(6) and (7) do not apply, and any entitlement to a downsizing addition is to be ignored, when deciding whether paragraph (a) of condition A is met.

(3) Condition B is that not all of VT is attributable to the person's qualifying residential interest.

(4) Condition C is that there is a qualifying former residential interest in relation to the person (see sections 8H(4A) to (4F) and 8HA).

(5) Condition D is that the value of the qualifying former residential interest exceeds so much of [F3 the value transferred by the transfer of value under section 4 on the person’s death] as is attributable to the person's qualifying residential interest.

Section 8FE(2) explains what is meant by the value of the qualifying former residential interest.

(6) Condition E is that at least some of the remainder is closely inherited, where “the remainder” means everything included in the person's estate immediately before the person's death other than the person's qualifying residential interest.

(7) Condition F is that a claim is made for the addition in accordance with section 8L(1) to (3).

(8) Where there is entitlement as a result of this section, the addition—

(a) is equal to the lost relievable amount (see section 8FE) if that amount is less than so much of VT as is attributable to so much of the remainder as is closely inherited, and

(b) otherwise is equal to so much of VT as is attributable to so much of the remainder as is closely inherited.

(9) Subsection (8) has effect subject to section 8M(2G) (reduction of downsizing addition in certain cases involving conditional exemption).

(10) See also—

• section 8FC (effect of an addition: section 8E case),

• section 8FD (effect of an addition: section 8F case),

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

• section 8J (meaning of “inherit”),

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

• section 8M (cases involving conditional exemption).]

Textual Amendments

F1 Ss. 8FA-8FE inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 15 para. 5

F2 Words in s. 8FA(2)(b) substituted (with application in accordance with s. 66(6) of the amending Act) by Finance Act 2019 (c. 1), s. 66(2)

F3 Words in s. 8FA(5) substituted (with application in accordance with s. 66(6) of the amending Act) by Finance Act 2019 (c. 1), s. 66(2)