Inheritance Tax Act 1984

48 Excluded property. U.K.

(1) A reversionary interest is excluded property unless—

(a) it has at any time been acquired (whether by the person entitled to it or by a person previously entitled to it) for a consideration in money or money’s worth, or

(b) it is one to which either the settlor or his spouse [F1 or civil partner] is or has been beneficially entitled, or

(c) it is the interest expectant on the determination of a lease treated as a settlement by virtue of section 43(3) above [F2 or,

(d) in a case where paragraphs (a), (b) and (d) of section 74A(1) are satisfied—

(i) it is a reversionary interest, in the relevant settled property, to which the individual is beneficially entitled, and

(ii) the individual has or is able to acquire (directly or indirectly) another interest in that relevant settled property.

Terms used in paragraph (d) have the same meaning as in section 74A].

(2) In relation to a reversionary interest under a settlement made before 16th April 1976, subsection (1) above shall have effect with the omission of paragraph (b); and, if the person entitled to a reversionary interest under a settlement made on or after 16th April 1976 acquired the interest before 10th March 1981, that subsection shall have effect with the omission of the words “or has been” in paragraph (b).

(3) Where property comprised in a settlement is situated outside the United Kingdom—

(a) the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the [F3 property became comprised in the settlement (but see also subsection (3F))], and

(b) section 6(1) above applies to a reversionary interest in the property but does not otherwise apply in relation to the property [F4 ;

but this subsection is subject to [F5 subsections (3B) [F6 to (3E)]] below] [F7 and to Schedule A1].

[F8 (3A) Where property comprised in a settlement is a holding in an authorised unit trust or a share in an open-ended investment company—

(a) the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the [F9 property became comprised in the settlement (but see also subsection (3F))], and

(b) section 6(1A) above applies to a reversionary interest in the property but does not otherwise apply in relation to the property [F10 ;

but this subsection is subject to [F11 subsections (3B) and (3E)] below]] [F7 and to Schedule A1].

[F12 (3B) Property is not excluded property by virtue of subsection (3) or (3A) above if—

(a) a person is, or has been, beneficially entitled to an interest in possession in the property at any time,

(b) the person is, or was, at that time an individual domiciled in the United Kingdom, and

(c) the entitlement arose directly or indirectly as a result of a disposition made on or after 5th December 2005 for a consideration in money or money's worth.

(3C) For the purposes of subsection (3B) above—

(a) it is immaterial whether the consideration was given by the person or by anyone else, and

(b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy.]

[F13 (3D) Where paragraphs (a) to (d) of section 74A(1) are satisfied, subsection (3)(a) above does not apply at the time they are first satisfied or any later time to make the relevant settled property (within the meaning of section 74A) excluded property.]

[F14 (3E) In a case where the settlor of property comprised in a settlement is not domiciled in the United Kingdom at the time the [F15 property became comprised in the settlement (but see also subsection (3F))], the property is not excluded property by virtue of subsection (3) or (3A) above at any time in a tax year if the settlor was a formerly domiciled resident for that tax year.]

[F16 (3F) If—

(a) an amount is payable in respect of property (“the existing property”) comprised in a settlement, and

(b) the amount represents an accumulation of income which (once accumulated) becomes comprised in the settlement,

subsections (3)(a), (3A)(a) and (3E) have effect, in the case of the amount, as if any reference to the time it became comprised in the settlement were to the time the existing property became comprised in the settlement.]

(4) Where securities issued by the Treasury subject to a condition of the kind mentioned in subsection (2) of section 6 above are comprised in a settlement, that subsection shall not apply to them; but the securities are excluded property if—

(a) a person [F17 of a description specified in the condition in question] is entitled to a qualifying interest in possession in them, or

(b) no qualifying interest in possession subsists in them but it is shown that all known persons for whose benefit the settled property or income from it has been or might be applied, or who are or might become beneficially entitled to an interest in possession in it, are persons [F17 of a description specified in the condition in question].

[F18 This subsection is subject to Schedule A1.]

(5) Where—

(a) property ceased to be comprised in one settlement before 10th December 1981 and after 19th April 1978 and, by the same disposition, became comprised in another settlement, or

(b) property ceased to be comprised in one settlement after 9th December 1981 and became comprised in another without any person having in the meantime become beneficially entitled to the property (and not merely to an interest in possession in the property),

subsection (4)(b) above shall, in its application to the second settlement, be construed as requiring the matters there stated to be shown both in relation to the property comprised in that settlement and in relation to the property that was comprised in the first settlement.

(6) Subsection (5) above shall not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the second settlement before 10th December 1981.

(7) In this section “qualifying interest in possession” has the same meaning as in Chapter III of this Part of this Act.

Textual Amendments

F1 Words in s. 48(1)(b) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 12

F2 S. 48(1)(d) and words inserted (20.6.2012 and with effect in accordance with s. 210(5) of the amending Act) by Finance Act 2012 (c. 14), s. 210(2)(a)

F3 Words in s. 48(3)(a) substituted (with effect in accordance with s. 73(11) of the amending Act) by Finance Act 2020 (c. 14), s. 73(2)(a)

F4 Words in s. 48(3) inserted (5.12.2005) by Finance Act 2006 (c. 25), s. 157(2)(6) (with s. 157(5))

F5 Words in s. 48(3) substituted (20.6.2012 and with effect in accordance with s. 210(5) of the amending Act) by Finance Act 2012 (c. 14), s. 210(2)(b)

F6 Words in s. 48(3)(b) substituted (with effect in accordance with s. 30(9)-(12) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 30(4)(a)

F7 Words in s. 48(3)(3A) inserted (with effect in accordance with Sch. 10 para. 9 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 10 para. 4(a)

F8 S. 48(3A) inserted (with effect as mentioned in s. 186(8) of the amending Act) by Finance Act 2003 (c. 14), s. 186(3)

F9 Words in s. 48(3A)(a) substituted (with effect in accordance with s. 73(11) of the amending Act) by Finance Act 2020 (c. 14), s. 73(2)(b)

F10 Words in s. 48(3A) inserted (5.12.2005) by Finance Act 2006 (c. 25), s. 157(3)(6) (with s. 157(5))

F11 Words in s. 48(3A)(b) substituted (with effect in accordance with s. 30(9)-(12) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 30(4)(b)

F12 S. 48(3B)(3C) inserted (5.12.2005) by Finance Act 2006 (c. 25), s. 157(4)(6) (with s. 157(5))

F13 S. 48(3D) inserted (20.6.2012 and with effect in accordance with s. 210(5) of the amending Act) by Finance Act 2012 (c. 14), s. 210(2)(c)

F14 S. 48(3E) inserted (with effect in accordance with s. 30(9)-(12) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 30(4)(c)

F15 Words in s. 48(3E) substituted (with effect in accordance with s. 73(11) of the amending Act) by Finance Act 2020 (c. 14), s. 73(2)(c)

F16 S. 48(3F) inserted (with effect in accordance with s. 73(11) of the amending Act) by Finance Act 2020 (c. 14), s. 73(2)(d)

F17 Words in s. 48(4)(a)(b) substituted (29.4.1996 with effect as mentioned in s. 154(9)(a)(b) of the amending Act) by 1996 c. 8, s. 154(7), Sch. 28 para. 8 (with s. 154(5))

F18 Words in s. 48(4) inserted (with effect in accordance with Sch. 10 para. 9 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 10 para. 4(b)