Inheritance Tax Act 1984 section 56

Exclusion of certain exemptions

Section 56 removes certain IHT exemptions where reversionary interests in settled property have been acquired for value, to prevent avoidance schemes that exploit the interaction between exempt transfers and settled property rules.

• The spouse/civil partner exemption and the exemptions for charities, political parties, national bodies and historic building maintenance funds do not apply to property given in exchange for a reversionary interest that is excluded from the acquirer's estate under section 55(1).
• Where someone purchases a reversionary interest in settled property for money or money's worth, the spouse/civil partner exemption is denied when the settled property eventually passes to them on termination of the prior interest.
• The charity, political party, national purpose and historic building maintenance fund exemptions do not apply where settled property passes to an exempt body and that body (or another exempt body) has purchased an interest under the settlement for money or money's worth.
• These restrictions do not apply to transfers of value that merely consist of allowing another person the use of money or property (i.e. loans), and transitional rules preserve the position for acquisitions made before specified dates in 1976 and 1978.