Q&As

(A) and (B) are living in a property in which they have been given a life interest. On the last of them to die the property passes to charities (under the Will of the deceased who gifted them a life interest in the property). Do they need to pay inheritance tax and does it make a difference if the property is based on agricultural land?

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Produced in partnership with Ward Hadaway
Published on LexisPSL on 09/03/2016

The following Private Client Q&A Produced in partnership with Ward Hadaway provides comprehensive and up to date legal information covering:

  • (A) and (B) are living in a property in which they have been given a life interest. On the last of them to die the property passes to charities (under the Will of the deceased who gifted them a life interest in the property). Do they need to pay inheritance tax and does it make a difference if the property is based on agricultural land?
  • Position in relation to the interests under the terms of the Will
  • Agricultural land

On the death of a testator, a liability to inheritance tax (IHT) will depend on several factors including the extent to which reliefs and exemptions are available such as spouse exemption and agricultural property relief (APR). The reversionary gift to charity is ignored for the purpose of calculating the rate of tax on the testator's death and charity exemption is not available because the charity does not take immediately and outright on the testator's death (Section 23(2)(a) of the Inheritance Tax Act 1984 (IHTA 1984)).

Will trusts will either be relevant property trusts (defined in IHTA 1984, s 58) for inheritance tax or qualifying interests in possession (defined in IHTA 1984, s 59). For further details on these differing types of trust, see Practice Notes: The meaning of relevant property, The meaning of qualifying interest in possession and Qualifying interest in possession trusts—IHT treatment.

If the trust is a relevant property trust then it will be subject to periodic charges and exit charges (see IHTA 1984, ss 58–63). These charges are explained in the Practice Notes: Relevant property trusts—the principal (ten-year) charge and Relevant property trusts—the ex

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