Inheritance Tax Act 1984 Schedule 6 paragraph 3

Sales and mortgages of reversionary interests

Paragraph 3 of Schedule 6 protects purchasers and mortgagees of reversionary interests in settled property that were sold or mortgaged before 27 March 1974, ensuring they pay no more inheritance tax than the estate duty that would originally have applied.

• Where a reversionary interest in settled property was sold or mortgaged for full consideration before 27 March 1974, the purchaser or mortgagee is protected from paying more tax than the estate duty that would have been due had the inheritance tax legislation never been enacted.
• Any tax that the mortgagee is relieved from paying but which remains payable by the mortgagor ranks as a charge that sits behind the mortgagee's charge — meaning the mortgagee's security takes priority.
• Where the reversionary interest was sold or mortgaged to a close company in which the seller or mortgagor was a participator, the protection only applies to the extent that other persons held rights and interests in that company.
• This provision is a transitional measure bridging the move from estate duty to capital transfer tax (and subsequently inheritance tax), preserving the expectations of those who entered into transactions under the old regime.