Introduction Background Note
4.Reversionary interests, as defined in section 47 of IHTA, are not generally treated as part of a person’s IHT estate, but section 48(1) of IHTA provides for certain exceptions to that rule.
5.IHT charges arise on relevant property:
	at 20 per cent on assets put into trust which exceed the IHT nil rate band (with a further charge of up to 20 per cent if the person dies within seven years of making the transfer);
	at 6 per cent every ten years on the value of the trust assets over the nil rate band (the “periodic charge”); and
	an “exit charge” when funds are taken out of trust between ten-year anniversaries at a rate based on the time since the last “periodic charge”.
6.HM Revenue & Customs (HMRC) became aware of arrangements that sought to avoid any IHT charges on assets that are put into a trust. The arrangement was designed to exploit the rules that treat certain reversionary interests as part of a person’s estate in order to reduce the entry charge where assets are put in to trust.
7.This section provides that where certain reversionary interests that are treated as part of a person’s estate come to an end and that person takes their actual interest in the relevant property trust then there is a deemed disposition for IHT purposes. This means that there is a transfer of value and IHT will be charged based on the value of the reversionary interest immediately before it came to an end. To prevent these charges being avoided by a person gifting their reversionary interest to another person, such a transfer will be an immediately chargeable IHT event.
8.These changes affect only reversionary interests in relevant property. They do not affect certain interests in possession which are not included as part of the relevant property regime (for example, a disabled person’s interest).