Inheritance Tax Act 1984 Schedule 4 paragraph 15A

Maintenance fund following interest in possession

Paragraph 15A modifies the rules for taxing property leaving heritage maintenance funds where that property entered the fund as a result of a transfer by someone who held an interest in possession in the settled property.

• This paragraph applies where property entered a maintenance fund through an exempt transfer made by a life tenant (interest in possession holder), with the exemption arising from the combined effect of the heritage maintenance fund exemption (section 27) together with either section 57(5) or section 57A.
• The normal Schedule 4 charging rules are modified so that references to the original settlor are generally replaced with references to the person who held the interest in possession at the time the property entered the fund — meaning the tax charge on property leaving the fund is calculated by reference to that person's cumulative total of transfers rather than the settlor's.
• The exception allowing property to leave the fund tax-free is adjusted: if the interest in possession holder had already died before the property entered the fund, the exception does not apply at all; otherwise, property can leave tax-free if it passes to the interest in possession holder, their spouse or civil partner, or (if they died within the previous two years) their widow, widower, or surviving civil partner — but only where that person would have been entitled to the property had it not gone into the fund in the first place.
• Where property has moved between maintenance fund settlements and HMRC (the Board) makes a determination, references to the interest in possession holder can instead be read as references to the original settlor of the current or any previous settlement, as HMRC decide.

---