Inheritance Tax Act 1984 section 146

Inheritance (Provision for Family and Dependants) Act 1975

Section 146 deals with the inheritance tax consequences when a court makes an order under the Inheritance (Provision for Family and Dependants) Act 1975 to redirect part or all of a deceased person's estate, or to claw back lifetime gifts the deceased made to defeat a family provision claim.

• When a court orders financial provision from the deceased's estate under section 2 of the 1975 Act, the estate is treated for IHT purposes as if it had always devolved according to the court order from the date of death, and tax is recalculated accordingly.
• Where the court orders a donee to return money or property under section 10 of the 1975 Act (anti-avoidance for lifetime gifts made to defeat a claim), the personal representatives can claim repayment of lifetime IHT on the original gift within four years of the order, and the returned assets plus any tax repaid are added to the deceased's death estate.
• Actions carried out in compliance with a 1975 Act order — such as creating or varying settlements — do not trigger separate IHT charges (for example under the settled property rules), although subsequent events such as the later termination of a life interest created by the order can still give rise to a charge.
• Where proceedings under the 1975 Act are stayed or dismissed on agreed terms set out in or scheduled to the court order, those terms are treated as if they were provisions of a formal section 2 or section 10 order, so the same IHT adjustments apply.