These provisions do not take property (
IHTM04030) outside the charge to IHT;
instead the value of the property is left out of account or
disregarded in certain circumstances. The impact of this
distinction is that the property is not ‘exempt’ from
the charge and remains part of the individual’s estate. It
can thus affect the value of other property (or part of the same
property) which is within the tax charge.
Example
The deceased dies owning a ½ share of their house
absolutely, and is entitled to an interest in possession (IIP) (
IHTM16000) in a trust that owns the
other ½ share and qualifies for Estate Duty surviving spouse
exemption (
IHTM04341). As the deceased is
beneficially entitled (
IHTM04031) to whole property, you
should value the entirety of the house, bring an arithmetic ½
share into charge in the deceased’s Free Estate but leave the
value of the ½ share in trust out of account.
