Chapter: 2 - Inheritance Tax Mitigation: The Basics

Settlor and spouse/civil partner should be excluded

2.3.2

To be effective for IHT purposes the settlor must be excluded from benefit to avoid the GWR regime (FA 1986 s102): see 3.2.2. There is no pro rata provision.  While generally the pre-owned assets (POA) regime (see 3.2.3) will not apply if either GWR does or would apply but for certain express exceptions, the two regimes are not completely mutually exclusive.  Hence, for example, while GWR requires a disposition by way of gift, a disposal for full consideration of land which the donor occupies may be caught by POA.  The following comments about the spouse/civil partner apply to the POA regime for settled intangible property just as they do to GWR.  The settlor’s spouse/civil partner can be included, although this will have Income Tax implications (under ITTOIA 2005 part 5 chapter 5) and, before 2008/09, also CGT implications (TCGA 1992 s77, repealed from 2008/09). However, these anti-avoidance provisions will not apply if the spouse/civil partner can benefit only after the settlor’s death.