Inheritance Tax Act 1984 section 55

Reversionary interest acquired by beneficiary

Section 55 deals with the inheritance tax consequences when a person who already has an interest in settled property acquires a reversionary interest expectant on that existing interest, and prevents avoidance schemes that might otherwise exploit these rules.

• Where a person entitled to an interest (whether in possession or not) in settled property acquires a reversionary interest expectant on that interest, the reversionary interest is excluded from the acquirer's estate for inheritance tax purposes.
• Because the reversion is not part of the acquirer's estate, any consideration paid to acquire it effectively reduces the acquirer's estate — creating a potential transfer of value.
• The normal protection under section 10(1) — which exempts dispositions not intended to confer a gratuitous benefit — is specifically disapplied, so the acquirer cannot argue the purchase was a commercial transaction to escape an inheritance tax charge.
• Spouse or civil partner exemption under section 18 cannot be used to circumvent these rules, for example by routing the purchase of the reversion through a spouse.

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