Long term residence and domicile status The long term residence (or domicile status for periods before 6 April 2025) of the transferor and the situs of the asset determine whether inheritance tax (IHT) is, on the face of it, chargeable on a transfer made during the transferor’s lifetime (an actual disposal) or on death (a deemed disposal). Where a transferor is in scope for IHT due to their long term residence (or, before 6 April 2025, their domicile) and the situs of the asset, exemptions and reliefs can be applied to determine whether IHT is in fact chargeable or the extent to which it is chargeable. Whether IHT exemptions and reliefs apply depends on a number of factors, including: • whether it is a lifetime transfer or transfer on death • who the recipient is • what asset is transferred, and • the reason for the transfer Order for applying exemptions and reliefs When considering which exemptions and reliefs might apply to a transfer,

Private Client analysis: This First-tier Tribunal case concerned whether an additional inheritance tax (IHT) charge arose under section 94 of the Inheritance Tax Act 1984 (IHTA 1984) when a close company (wholly owned by the appellant, Ms Annette Tonkin) entered into an Employee Benefit Trust (EBT) arrangement designed to pay her a bonus. The Tribunal allowed Ms Tonkin's appeal. It held that s 94(2)(a) IHTA 1984 applied because the transfer was attributable to a payment taken into account for income tax purposes (ie employment income). Tax practitioners representing clients involved in historic EBTs or similar schemes should review this judgment closely when evaluating HMRC's grounds for imposing IHT liabilities. The decision may also be relevant in challenging other forms of hybrid enforcement where HMRC seeks to recover tax under multiple tax provisions for a single economic transaction. Written by Francis Hudson MA (Cantab), FCA, CTA, ATT (fellow), tax partner, MHA.

STOP PRESS: At Budget 2025, it was announced that the government will legislate to prevent IHT avoidance through the use of situs of personal and trust property. One such change is the extension of the rules on the indirect holding of UK residential property to UK agricultural property. For more information, see:Budget 2025—Private Client analysis — International and Policy Paper: Inheritance Tax: anti-avoidance measures for non-long-term UK residents and trusts. This Practice Note summarises the changes to the excluded property rules from 6 April 2017 introduced by the Finance (No 2) Act 2017 (F(No 2)A 2017). Under the changes, UK inheritance tax (IHT) applies to UK residential property held by (or for) a long-term UK resident (LTR) directly or indirectly, unless it is held through a diversely held vehicle. Prior to 6 April 2025, when domicile ceased to be a relevant factor for IHT, these rules applied to individuals who were not domiciled, or deemed domiciled in the UK. For information on the relevance of domicile

Section 18 of the Inheritance Tax Act 1984 (IHTA 1984) contains an exemption from inheritance tax (IHT) for transfers of value between spouses and civil partners. The amount of the IHT spouse exemption is unlimited except on transfers (either during lifetime or on death) from a long-term resident (LTR) spouse to a non-LTR spouse. In such cases, the exemption is limited by IHTA 1984, s 18(2). From 6 April 2025, the concept of long-term residence replaced that of domicile in the context of liability to IHT. A LTR is any individual who has been UK resident for at least ten out of the last 20 tax years immediately preceding the tax year in which a charge to IHT applies. An individual will be a LTR even if they have been non-UK resident for some years during the preceding 20-year period, provided that the total period of UK residence is at least ten years. For more information on long-term residence, see Practice Notes: A new residence-based regime for IHT from 2025–26 and New IHT regime

HMRC has announced that from August 2024 the modular format of the IHT100 has been replaced by several ‘stand-alone’ forms (accounts) which are specific to the chargeable event being reported. New versions of forms IHT100a-f have been published, including a new IHT100h form which should be used to inform HMRC about assets ceasing to be held in an ’18 to 25 trust’.

Although there is no requirement in the legislation for a claim for a deceased person’s own RNRB (it is granted automatically in the qualifying circumstances), formal claims are required for the downsizing addition and the brought forward allowance. Personal representatives (PRs) of estates for which there is no IHT liability and which meet certain conditions to be an excepted estate do not have to submit an IHT account to HMRC and may simply provide the requisite information about the value of the

General principles Agricultural property relief (APR) was provided for from the outset when capital transfer tax was introduced by the Finance Act 1975. The nature of the relief has changed significantly over the years and it is now extremely generous in many cases. APR should be considered in conjunction with business property relief (BPR). Although APR applies in priority to BPR where both reliefs apply there are cases where the APR will not apply to agricultural land or an element of its value and in such cases BPR may be applicable. APR applies so as to reduce the value of a transfer of 'agricultural property' by the appropriate percentage (ie 100% or 50%) of the value of that transfer which is attributable to the 'agricultural value'. The relief also applies to charges arising on discretionary trusts (under Chapter III of Part III of the Inheritance Tax Act 1984 (IHTA 1984)). Agricultural property is defined to mean: 'agricultural land or pasture and includes woodland and any building used in connection with the intensive rearing

This document provides general guidance regarding agricultural property relief (APR) from inheritance tax (IHT) on or after 6 April 2026 for non-legal professional persons making a Will, personal representatives, trustees and beneficiaries of trusts or estates containing agricultural property. Your Private Client practitioner will be able to provide specific advice based on your circumstances. As reported widely in the news, the government has brought in changes to the way that inheritance tax (IHT) is applied to farms and agricultural property from April 2026 by amending agricultural property relief (known as APR). Similar changes have been made to the way that IHT relief is applied to business property by restricting business property relief (known as BPR). These changes apply mainly from 6 April 2026, but some gifts or transfers to trusts made since 30 October 2024 are also affected. This guide aims to help you to understand what APR is and when it may be claimed. The availability of APR in different scenarios is complex and this guide aims only

This Practice Note provides an overview of the main anti-avoidance measures that HMRC seek to rely on to prevent the avoidance of inheritance tax (IHT) in the UK. Note that the main body of the IHT rules is covered in several other Practice Notes. These are referenced where relevant. While not necessarily drafted as anti-avoidance provisions, there are various conditions and provisions which restrict the availability of IHT reliefs and exemptions (eg the requirements for sections 142 and 144 of the Inheritance Tax Act 1984 (IHTA 1984) to apply following a variation or appointment out of discretionary trust within two years of death), which are not covered in this Practice Note. It is important that individuals are aware of the UK tax implications of lifetime dispositions, gifts or transfers, including the effect on the taxation of their estate on death. The key issues discussed in this Practice Note are: • excluded property rules and long-term residence (or prior to 6 April 2025, domicile) • gifts with reservation of benefit (GROB) rules • the pre-owned asset tax (POAT) • capital

Business property relief (BPR) is an important relief for inheritance tax (IHT) purposes. The relief applies both to individuals and to trusts that hold qualifying property. BPR applies to reduce the transfer of value for IHT purposes and is given before annual exemptions. BPR applies to both lifetime gifts and property passing on death. It also applies to charges arising on relevant property trusts under Chapter III of Part III of the Inheritance Tax Act 1984 (IHTA 1984). In this context the word 'business' includes a business carried on in the exercise of a profession or vocation but does not include business carried on otherwise than for gain. Categories of business property and rates of BPR Property that qualifies for BPR is called 'relevant business property'. These are the following categories of relevant business property with the following levels of relief. Types of relief Rate of relief A business or interest in a business or share in a partnership (IHTA 1984, s 105(1)(a)) (note Nelson Dance decision). 100%, subject to the Limit on the

This document provides general guidance regarding business property relief (BPR) from inheritance tax (IHT) on or after 6 April 2026 for non-legal professional persons making a Will, personal representatives, trustees and beneficiaries of trusts or estates containing business property. Your Private Client practitioner will be able to provide specific advice based on your circumstances. As reported widely in the news, the government has introduced changes to the application of inheritance tax (IHT) to ‘business property’ from April 2026 by amending business property relief (known as BPR). Similar changes have been made to the way that IHT relief is applied to agricultural property by restricting agricultural property relief (known as APR). These changes apply mainly from 6 April 2026, but some gifts or transfers to trusts made since 30 October 2024 are also affected. This guide aims to help you understand what BPR is, when it may be claimed and what reliefs rates are available. Determining whether your property qualifies for BPR can be complex and so this guide provides

FORTHCOMING CHANGE: Following the announcement at Autumn Budget 2024 on 30 October 2024, unused pension funds and pension death benefits paid out following an individual’s death on or after 6 April 2027 will be subject to IHT. New section 150A of the Inheritance Tax Act 1984 is added by section 66 of the Finance Act 2026, with effect from 6 April 2027. For more information, see Practice Note: Hot topic—the reform of inheritance tax on pensions and News Analyses: Autumn Budget 2024—Private Client analysis — Inheritance tax and HMRC confirms new IHT rules on unused pension funds to apply from 6 April 2027. This Practice Note sets out the principles under which the basic nil rate band (NRB) and the transferable NRB are calculated and applied on the death of an individual. It highlights some features of how the calculations apply in practice. For general information on the NRB, the transferable NRB and the residence NRB (RNRB) (also known as the additional threshold) and in particular how these reliefs