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Inheritance Tax Notes

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Inheritance Tax Revision

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Legal requirements o Non­consensual o No intention to confer value


S1 It is a charge on chargeable transfers s2: chargeable transfer is transfer of value made by individual that is not exempt s3: transfer of value is disposition causing loss to the estate.
o loss to estate is measure so catches deliberate sale at undervalue


note consequence of selling controlling share i.e. >50% shares.

It is a chargeable transfer if it is a transfer of value o Calculated by the value of loss to the estate o Specific cases

Omissions not included in s.3(3) Trransfers not intended to confer gratuitous benefit, not included, s.10 PETs are prima facie chargeable transfers that are potentially exempt (so a subset)



Life transfers Transfers on death Fundamental principle
− inheritance tax shall be charged on the value transferred by chargeable transfer, s.1

− What is a chargeable transfer? S.2

• A transfer of value s.3 A) A disposition causing a loss to the value of D's state, s.3(1) IHTA 1984 (1) Disposition (a) Includes omissions, s.3(3) IHTA (i) So for example if D makes a tax free transfer to his son by engaging him to

work for a specified tim and then omits to sue Unless you can show that it was not deliberate, s.3(3) IHTA 1984 (b) DOES NOT include transfers not intended to confer gratuitous benefit, s.10 IHTA 1984 (i) A subjective non­donative intent Executors of Postlethwaite v HMRC (2006)
payment made under binding legal obligation would not be intended to have a
subjective non­donative intent (ii) And an objective fact (a) A transaction at arms length between two persons not connected to
each other, s.10(1)a IHTA 1984 (b) Such that it might be expected to be made so, s.10(1)b IHTA 1984 IRC
v Spencer­Nairn (1991) there was subjective non­donative intent but
the property was sold for 94000 below market price because he
mistakenly thought he was liable for repairs. It was a connected person.
Held that the discrepancy was only one factor which had to be taken
into account - arms length vendor shold have actual vendor's
reasonable belief (c) Associated operations rule, s.268, IHTA 1984 (i) Affect the same property (ii) One is effected with reference to another and both must be relevant to the
scheme MacPherson v IRC (1988) (iii) The charge is deemed to take place at the time of the last of them Loss to value (a) The value of his estate after the disposition is less that it would be but for the disposition,
and the amount by which it is less is the value trasnferre D's estate (a) All property to which a person is beneficially entitled


(2) (3)

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