Inheritance Tax Act 1984 section 54

Exceptions from charge on death

Section 54 sets out the circumstances in which the value of settled property in which the deceased held an interest in possession is excluded from the deceased's estate on death for inheritance tax purposes.

• Where the life tenant dies during the settlor's lifetime and the property reverts to the settlor, or passes to the settlor's spouse, civil partner, or recent widow/widower/surviving civil partner who is a long-term UK resident, the settled property is excluded from the deceased life tenant's estate.
• For interests in possession arising on or after 22 March 2006, the reversion exemptions in subsections (1) and (2) only apply if the interest is a disabled person's interest or a transitional serial interest; a separate rule applies for immediate post-death interests where the settlor's surviving spouse or civil partner inherits.
• Transitional protection exists for settled property that was excluded property before 30 October 2024 under the former domicile-based rules: if the property was settled before that date, the interest was acquired before that date, and at death the property remains situated outside the UK (and is not attributable to UK residential property) or is held in an authorised unit trust or open-ended investment company, its value is excluded from the deceased's estate.
• Where it cannot be determined which of two or more deceased persons survived the other, they are assumed to have died at the same instant.