Inheritance Tax Act 1984 Schedule 2 paragraph 5

Conditionally exempt transfers

Schedule 2 paragraph 5 deals with how inheritance tax is calculated on conditionally exempt transfers when the conditions are breached after a reduction in tax rates, and the tax rate would normally be determined by reference to an earlier death.

• When property that was conditionally exempt from inheritance tax loses that exemption because the conditions are breached, a tax charge arises under sections 32 or 32A.
• If the breach occurs after a reduction in the rates set out in the Schedule 1 tax table, the timing of the rate change matters for calculating the charge.
• Where the applicable tax rate would normally be determined by reference to a death that took place before the rate reduction, the paragraph adjusts the calculation.
• The tax is charged as if the reduced rate table (or the most recently reduced table, if there have been multiple reductions) had already been in force at the date of the earlier death.