IHTM35151 - IHT implications of an Instrument of Variation: effect of coming within s.142

When a variation satisfies the requirements of IHTA84/S142 (1) and there is a valid election or, on or after 1 August 2002, a valid statement of intent

• the variation is not a transfer of value, and
• the IHTA applies as if the deceased had effected the variation

Consequently, for example

• if the extent to which the death estate is exempt is increased ( IHTM35152) or decreased, you may need to adjust the tax ( IHTM35153) on the whole of the death estate, including property taxable at a separate title, such as settled property in which the deceased had a life interest,
• if a variation sets up a non-interest in possession trust, the deceased is treated as the settlor, and
• the GWR rules in FA86/S102 cannot apply to a disposition which is accepted as a variation within IHTA84/S142 (1). This is because the effect of IHTA84/S142 (1) is that the deceased is treated as the donor.