Inheritance Tax Act 1984 section 49

Treatment of interests in possession

Section 49 establishes the principle that a person with an interest in possession in a trust is treated as owning the underlying trust property for inheritance tax purposes, subject to important restrictions introduced from 22 March 2006 and an anti-avoidance rule for purchased interests.

• A person with an interest in possession in settled property is treated as the outright owner of that property for inheritance tax purposes, meaning the full value of the underlying assets falls within their estate.
• For interests acquired on or after 22 March 2006, this ownership treatment only applies if the interest is an immediate post-death interest, a disabled person's interest, or a transitional serial interest.
• For interests acquired before 22 March 2006, the ownership treatment is disapplied at any time when the trust property is subject to the bereaved minors trust rules under section 71A.
• Where a person acquires an interest in possession by purchasing it for money or money's worth, the anti-avoidance rule in subsection (2) requires the consideration given to be assessed at its real value, ignoring the deemed ownership rule, to prevent manipulation of valuations.