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Inheritance Tax Act 1984

Type Public General Act

Publication 1984-07-31

Last updated 2025-04-06

State In force

Department Statute Law Database

Source legislation.gov.uk

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(5) Where a proportion of the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan by the same proportion.

(6) In this Schedule, references to a loan include an acknowledgment of debt by a person or any other arrangement under which a debt arises; and in such a case references to money or money's worth made available under the loan are to the amount of the debt.

PART 2 — Supplementary

Disposals and repayments

5

(1) This paragraph applies to—

(a) property which constitutes consideration in money or money's worth for the disposal of property to which paragraph 2 or paragraph 3(a) applies;

(b) any money or money's worth paid in respect of a creditor's rights falling within paragraph 3(a);

(2) If and to the extent that this paragraph applies to any property—

(a) for the two-year period it is not excluded property by virtue of section 6(1), (1A) or (2) , section 48(4) or section 48ZA, and

(b) if it is held in a qualifying foreign currency account within the meaning of section 157 (non-residents' bank accounts), that section does not apply to it for the two-year period.

(3) The two-year period is the period of two years beginning with the date of—

(a) the disposal referred to in sub-paragraph (1)(a), or

(b) the payment referred to in sub-paragraph (1)(b).

(4) The value of any property within sub-paragraph (1)(c) is to be treated as not exceeding the relevant amount.

(5) The relevant amount is—

(a) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(a) (“the consideration”), the value of the consideration at the time of the disposal referred to in that sub-paragraph, and

(b) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(b), the amount of the money or money's worth paid as mentioned in that sub-paragraph.

Tax avoidance arrangements

6

(1) In determining whether or to what extent property situated outside the United Kingdom is excluded property, no regard is to be had to any arrangements the purpose or one of the main purposes of which is to secure a tax advantage by avoiding or minimising the effect of paragraph 1 or 5.

(2) In this paragraph—

“tax advantage” has the meaning given in section 208 of the Finance Act 2013;

“arrangements” includes any scheme, transaction or series of transactions, agreement or understanding (whether or not legally enforceable and whenever entered into) and any associated operations.

Double taxation relief arrangements

7

(1) Nothing in any double taxation relief arrangements made with the government of a territory outside the United Kingdom is to be read as preventing a person from being liable for any amount of inheritance tax by virtue of paragraph 1 or 5 in relation to any chargeable transfer if under the law of that territory—

(a) no tax of a character similar to inheritance tax is charged on that chargeable transfer, or

(b) a tax of a character similar to inheritance tax is charged in relation to that chargeable transfer at an effective rate of 0% (otherwise than by virtue of a relief or exemption).

(2) In this paragraph—

“double taxation relief arrangements” means arrangements having effect under section 158(1);

“effective rate” means the rate found by expressing the tax chargeable as a percentage of the amount by reference to which it is charged.

PART 3 — Interpretation

UK residential property interest

8

(1) In this Schedule “UK residential property interest” means an interest in UK land—

(a) where the land consists of a dwelling,

(b) where and to the extent that the land includes a dwelling, or

(2) For the purposes of sub-paragraph (1)(b), the extent to which land includes a dwelling is to be determined on a just and reasonable basis.

(3) In this paragraph—

“interest in UK land” has the same meaning as it has for the purposes of section 1A(3)(b) of the 1992 Act (see section 1C of that Act);

“the land”, in relation to an interest in UK land which is an interest subsisting for the benefit of land, is a reference to the land for the benefit of which the interest subsists;

“dwelling” has the same meaning as it has for the purposes of paragraphs 16B to 16H of Schedule 2 to the Finance Act 2019;

“contract for an off-plan purchase” means a contract for the acquisition of land consisting of, or including, a building, or part of a building, that is to be constructed or adapted for use as a dwelling.

Close companies

9

(1) In this Schedule—

“close company” means a company within the meaning of the Corporation Tax Acts which is (or would be if resident in the United Kingdom) a close company for the purposes of those Acts;

references to an interest in a close company are to the rights and interests that a participator in a close company has in that company.

(2) In this paragraph—

“participator”, in relation to a close company, means any person who is (or would be if the company were resident in the United Kingdom) a participator in relation to that company within the meaning given by section 454 of the Corporation Tax Act 2010;

references to rights and interests in a close company include references to rights and interests in the assets of the company available for distribution among the participators in the event of a winding-up or in any other circumstances.

Partnerships

10

In this Schedule “partnership” means—

(a) a partnership within the Partnership Act 1890,

(b) a limited partnership registered under the Limited Partnerships Act 1907,

(c) a limited liability partnership formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002, or

(d) a firm or entity of a similar character to either of those mentioned in paragraph (a) or (b) formed under the law of a country or territory outside the United Kingdom.

240B

(1) This section applies in a case within section 240(2) which involves a loss of tax in relation to a chargeable transfer, where—

(a) the lost tax involves an offshore matter, or

(b) the lost tax involves an offshore transfer which makes the lost tax significantly harder to identify.

(2) Proceedings for the recovery of the lost tax may be brought at any time not more than 12 years after the later of the dates in section 240(2)(a) and (b).

(3) Lost tax “involves an offshore matter” if it is charged on or by reference to property which is situated or held in a territory outside the United Kingdom at, or immediately after, the time of the chargeable transfer.

(4) Lost tax “involves an offshore transfer” if—

(a) it does not involve an offshore matter, and

(b) the property is transferred to a territory outside the United Kingdom at a relevant time.

(5) In subsection (4)(b) “relevant time” means a time after the chargeable transfer but before—

(a) the date on which an account under section 216 is delivered to HMRC in relation to the chargeable transfer, or

(b) any later date on which an account under section 217 is so delivered.

(6) Where lost tax involves an offshore transfer, the cases in which the transfer makes the lost tax significantly harder to identify include any case where, because of the transfer—

(a) HMRC was significantly less likely to become aware of the lost tax, or

(b) HMRC was likely to become aware of the lost tax only at a significantly later time.

(7) But proceedings may not be brought under this section if—

(a) before the last date on which the proceedings could otherwise be brought, HMRC received relevant overseas information on the basis of which HMRC could reasonably have been expected to become aware of the lost tax, and

(b) it was reasonable to expect the proceedings to be brought before that date.

(8) In subsection (7)(a) “relevant overseas information” means information which is provided to HMRC by an authority in a territory outside the United Kingdom under—

(a) any provision of EU law relating to any tax, or

(b) an agreement to which the United Kingdom and that territory are parties, with or without other parties.

(9) This section is subject to any provision of this Act which allows for a longer period for the bringing of proceedings.

Provision of incorrect information.

48A

In this Act any reference to the commencement of a settlement is to the time when property first becomes comprised in it.

81B

(1) This section applies where—

(a) property is treated under section 80(1) as becoming comprised in a settlement, and

(b) the property would, apart from this section, be excluded property by virtue of meeting the condition in any of subsections (2) to (4) of section 48ZA (excluded property: long-term residence and domicile tests).

(2) For the purposes of this Chapter, except sections 78 and 79, the property is excluded property only if the condition in any of those subsections (whether or not the same one) is met by reference to the actual settlor and the actual settlement.

(3) Section 65(8) (no exit charge where property invested in Treasury securities thereby becomes excluded property) applies in relation to the property only if the condition in section 65(8ZA) is met by reference to the actual settlor.

(4) In this section, “the actual settlor” means the person who is the settlor of the property in relation to the settlement first mentioned in section 80(1); and “the actual settlement” means that settlement.

(5) This section does not apply in relation to property that is a holding in an authorised unit trust or a share in an open-ended investment company if the occasion first referred to in section 80(1) occurred before 22 July 2020.

82A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 74A: supplementary provision

Variation of undertakings.

Dormant assets

159A

(1) This section applies where there is a transfer in respect of a dormant asset.

(2) There is a transfer in respect of a dormant asset where an amount is transferred by an institution in respect of an asset—

(a) to an authorised reclaim fund, with the result that section 1 of the 2008 Act or section 2, 5, 8, 12 or 14 of the 2022 Act applies in relation to the asset, or

(b) to an authorised reclaim fund and one or more charities, with the result that section 2 of the 2008 Act applies in relation to the asset.

(3) For the purposes of this Act, rights which a person (“P”) acquires under Part 1 of the 2008 Act or Part 1 or sections 22 to 25 of the 2022 Act (as the case may be) after the transfer are to be treated as the same asset as the original rights, acquired as the original rights were acquired and having the same characteristics as those rights.

(4) For the purposes of this section—

“the 2008 Act” means the Dormant Bank and Building Society Accounts Act 2008;

“the 2022 Act” means the Dormant Assets Act 2022;

“asset” means an asset within the scope of the dormant assets scheme (see section 1(6) of the 2022 Act);

“authorised reclaim fund” has the same meaning as in the Dormant Assets Acts 2008 to 2022;

“the original rights” are—in a case where—section 8 of the 2022 Act (investment assets) applies in relation to the asset and there has been a conversion as mentioned in section 9(3)(a) of that Act in connection with the transfer, orsection 14 of the 2022 Act (securities assets) applies in relation to the asset and there has been a conversion as mentioned in section 15(1)(a) of that Act in connection with the transfer,P’s rights against the institution immediately before that conversion;in any other case, P’s rights against the institution immediately before the transfer.

6A

(1) For the purposes of this Act, an individual is a “long-term UK resident” at all times in a tax year if they were UK resident for at least 10 of the previous 20 tax years.

(2) But an individual is not a long-term UK resident at any time in a tax year (“the current tax year”) if they were non-UK resident—

(a) for any 10 consecutive tax years during the 19 tax years before the current tax year, or

(b) for at least the required number of consecutive tax years ending with the tax year before the current tax year.

(3) To determine “the required number” for the purposes of subsection (2)(b), take the 20 tax years ending with the last tax year for which the individual was UK resident and find the number of those tax years for which the individual was UK resident (“the number of resident years”).

The required number is the number in the second column of the following table corresponding to the number of resident years.

Number of resident years	Required number
13 or less	3
14	4
15	5
16	6
17	7
18	8
19	9
20	10

(4) In this section, “UK resident” means resident in the United Kingdom and “non-UK resident” means not resident in the United Kingdom.

(5) For the purposes of this section, a question as to whether the individual was UK resident for the tax year 2012-13 or an earlier tax year is to be determined as it would have been determined for income tax purposes for that tax year (and as to later tax years see Schedule 45 to the Finance Act 2013 (statutory residence test)).

(6) See also—

(a) section 6B (which modifies this section in its application to young persons);

(b) sections 267ZC to 267ZE (under which a person may be treated as a long-term UK resident as the result of an election).

6B

(1) In the application of section 6A(1) for the purpose of determining whether a young person is a long-term UK resident at any time in a tax year (“the current tax year”), that subsection has effect as if—

(a) for “20” there were substituted the number of whole tax years for which the person was alive before the current tax year, and

(b) for “10” there were substituted half the number mentioned in paragraph (a) (rounded up, if not a whole number, to the next whole number).

(2) In subsection (1), “young person” means an individual who was under the age of 20 immediately before the current tax year.

(3) For the purposes of this Act, an individual is not a long-term UK resident at any time in a tax year if they were under the age of 1 (or were not yet born) immediately before the tax year.

6C

For the purposes of this Act, a body corporate is a “long-term UK resident” at all times in a tax year if the body—

(a) is incorporated in the United Kingdom, or

(b) was (if in existence before the beginning of the tax year) within the charge to corporation tax on income at any time during the previous tax year by virtue of section 5(1) of the Corporation Tax Act 2009 (UK resident companies).

Meaning of “qualifying residential interest” , “qualifying former residential interest” and “residential property interest”

48ZA

(1) If property comprised in a settlement—

(a) is situated outside the United Kingdom, or

(b) is a holding in an authorised unit trust or a share in an open-ended investment company,

this section applies to the property and section 6(1) and (1A) (general excluded property rule) does not.

(2) If the settlor is alive, the property is excluded property at any time when the settlor is not a long-term UK resident.

(3) If the settlor died on or after 6 April 2025, the property is excluded property if the settlor was not a long-term UK resident immediately before they died.

(4) If the settlor died before 6 April 2025, the property is excluded property if the settlor was not domiciled in the United Kingdom when the property became comprised in the settlement.

(5) Subsections (2) and (3) do not apply at any time to property to which section 49(1) (certain interests in possession) applies if, at that time, the person beneficially entitled to the interest is a long-term UK resident.

(6) Subsections (2) to (4) do not apply to property if—

(a) an individual has been beneficially entitled to an interest in possession in the property—

(i) at any time on or after 6 April 2025 while a long-term UK resident, or

(ii) at any time before that date while domiciled in the United Kingdom, and

(b) the entitlement arose directly or indirectly as a result of a disposition made on or after 5 December 2005 for a consideration in money or money's worth.

(7) For the purposes of subsection (6)—

(a) it is immaterial whether the consideration was given by the individual or by anyone else, and

(b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy.

(8) Where the conditions in paragraphs (a) to (d) of section 74A(1) (arrangements involving acquisition of interest in settled property etc) are satisfied, none of subsections (2) to (4) applies at the time when the conditions are first satisfied or at any later time to make the relevant settled property (within the meaning of section 74A) excluded property.

(9) If—

(a) an amount is payable in respect of property (“the existing property”) comprised in a settlement, and

(b) the amount represents an accumulation of income which (once accumulated) becomes comprised in the settlement,

subsection (4) has effect in the case of the amount as if the reference to the time when it became comprised in the settlement were to the time when the existing property became comprised in the settlement.

(10) Subsections (2) to (4) are subject to Schedule A1 (overseas property with value attributable to UK residential property).

(11) The reference in subsection (1) to property comprised in a settlement does not include a reversionary interest in the property (and accordingly this section does not apply to such an interest and section 6(1) does).

75B

(1) This section applies if (ignoring this section) tax is charged under section 64 (ten-year anniversary charge) or 65 (exit charge) by reference to the value of property—

(a) that became comprised in the settlement in question before 30 October 2024,

(b) that immediately before 30 October 2024 was excluded property by virtue of section 48(3) or (3A) (as it had effect at that time), and

(i) is situated outside the United Kingdom and is not property to which paragraph 2 or 3 of Schedule A1 applies, or

(ii) is a holding in an authorised unit trust or a share in an open-ended investment company.

(2) The amount of tax charged by reference to the value of the property is, if it would otherwise be greater, to be reduced (but not below zero) to the difference between—

(a) the applicable cap in relation to the relevant period in which the occasion of the charge falls, and

(b) any amount of tax already charged under section 65 in relation to the settlement, earlier in that relevant period, by reference to the value of property meeting the conditions in subsection (1).

(3) In this section—

“the applicable cap” means—in relation to the first relevant period, £125,000 multiplied by the number of whole successive quarters in the period;in relation to a subsequent relevant period, £5 million;

“relevant period” means—the period beginning with 6 April 2025 and ending with the first ten-year anniversary falling after that date, andeach subsequent period of ten years.

Foreign diplomats etc

155ZA

(1) In determining whether a person is a long-term UK resident for the purposes of this Act, the person is treated (so far as would not otherwise be the case) as not having been resident in the United Kingdom for any tax year in which they were subject at any time to a relevant international exemption.

(2) For that purpose a person is “subject to a relevant international exemption” at a given time if, were the person to die at that time, an exemption in respect of inheritance tax would apply in relation to any of the person’s property by virtue of any of the following—

the Diplomatic Privileges Act 1964

the Consular Relations Act 1968

the International Organisations Act 1968

the European Communities Act 1972

the International Criminal Court Act 2001.

267ZC

(1) A person (“P”) who would not otherwise be a long-term UK resident is treated as one for the purposes of this Act at any time when an election under this section has effect.

(2) An election under this section may be made—

(a) if condition A or B is met, by P;

(b) if condition B is met, by P’s personal representatives.

(3) Condition A is that, at any time within the period of 7 years ending with the date on which the election is made, P had a spouse or civil partner who was a long-term UK resident.

(4) Condition B is that a person (“the deceased”) dies and, at any time within the period of 7 years ending with the date of their death, the deceased was—

(a) a long-term UK resident, and

(b) the spouse or civil partner of P.

267ZD

(1) An election under section 267ZC—

(a) must be made by notice in writing to HMRC, and

(b) has effect from such date as is, in accordance with subsection (2), specified in the notice.

(2) The date specified in a notice under subsection (1)(a) (“the specified date”) must—

(a) be after 5 April 2025,

(b) be within the period of 7 years ending with—

(i) in the case of a lifetime election, the date on which the election is made;

(ii) in the case of a death election, the date of the deceased's death, and

(3) The condition is that—

(a) in the case of a lifetime election—

(i) the person making the election was, on the specified date, married to or in a civil partnership with the spouse or civil partner, and

(ii) the spouse or civil partner was, on the specified date, a long-term UK resident;

(b) in the case of a death election—

(i) the person who is, by virtue of the election, to be treated as a long-term UK resident was, on the specified date, married to or in a civil partnership with the deceased, and

(ii) the deceased was, on the specified date, a long-term UK resident.

(4) A death election may only be made within—

(a) the period of 2 years beginning with the date of the deceased’s death, or

(b) such longer period as an officer of Revenue and Customs may in the particular case allow.

(5) Subsection (6) applies if—

(a) an election is made under section 267ZC,

(b) a disposition is made, or another event occurs, during the period beginning with the date on which the election first has effect and ending with the date on which the election is made, and

(6) This Act applies with the following modifications in relation to the transfer of value—

(a) subsections (1) and (6)(c) of section 216 (delivery of accounts) have effect as if the period specified in subsection (6)(c) of that section were the period of 12 months from the end of the month in which the election is made, and

(b) sections 226 (payment: general rules) and 233 (interest on unpaid tax) have effect as if the transfer were made at the time when the election is made.

(7) An election under section 267ZC cannot be revoked.

(8) If a person who made an election under section 267ZC is, for a period of 10 successive tax years beginning after the date on which the election is made, not resident in the United Kingdom, the election ceases to have effect at the end of that period.

(9) For the purposes of this section—

“death election” means an election made under section 267ZC in circumstances where Condition B in subsection (4) of that section is met;

“lifetime election” means any other election made under section 267ZC.

267ZE

(1) This section applies where an election under section 267ZA has effect in relation to a person immediately before 6 April 2025 (whether the election was made before or after that date).

(2) The person is treated for the purposes of this Act (so far as would not otherwise be the case)—

(a) as being a long-term UK resident, and

(b) as having been one at all times on and after 6 April 2025.

(3) But if the person is not resident in the United Kingdom for a relevant lapse period beginning at any time after the election is made, subsection (2) ceases to apply to them at the end of that period.

(4) In subsection (3) “relevant lapse period” means—

(a) if the election was made before 30 October 2024, a period of 4 successive tax years;

(b) if the election was made on or after that date, a period of 10 successive tax years.

267ZF

(1) This section applies to a case in which the application of any arrangements having effect under section 158 (double taxation conventions) depends (to any extent) on whether a person is treated as domiciled in the United Kingdom for the purposes of inheritance tax.

(2) The person is treated as domiciled in the United Kingdom for the purposes of inheritance tax if they are a long-term UK resident.

(3) Sections 276ZC to 267ZE (persons treated as long-term resident by virtue of election) are to be disregarded in applying this section in relation to any arrangements that are specified in an Order in Council made under section 158 of IHTA 1984 before 17 July 2013 (other than by way of amendment by an Order made on or after that date).

(4) Nothing in this section affects the interpretation of any such arrangements as are mentioned in section 158(6) (certain pre-1975 arrangements).

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