IHTM04282 - Reversionary interests: purchased reversions
A reversionary interest (IHTM16231) which has been acquired (whether by its current owner or by any previous owner) for a consideration in money or money바카라 사이트™s worth is not excluded property (IHTM04251). A tax charge may therefore arise on the transfer, whether in lifetime or on death, of a purchased reversion. Unless it is clear from the information already available to you that no purchase is involved, ask whether the reversion had at any time been purchased. As the consideration does not have to be full or in cash, it is always best to use the precise words of IHTA84/S48 (1)(a) in formulating your enquiries.
There are special rules aimed at the prevention of tax avoidance through purchases of reversionary interests, IHTA84/S55. They apply where a reversion under a settlement is purchased by a person, such as the life tenant, entitled to any prior interest under the settlement. The rules treat the reversion when purchased as not forming part of the purchaser바카라 사이트™s estate and prevent the provisions of IHTA84/S10 (exclusion of arm바카라 사이트™s length transactions (IHTM04151)) from applying even if it was an arm바카라 사이트™s length deal.
As the reversion does not form part of the purchaser바카라 사이트™s estate, the money they paid for the reversion gives rise to a loss to their estate (IHTM04054). In these circumstances the purchaser is treated as having made a transfer of value (IHTM04024) equal to the purchase price.
Example
Property is settled on Charles for life with remainder to Brendan. Charles purchases Brendan바카라 사이트™s reversion for its full market value of £5,000. As Charles is the life tenant, the settled property is already part of his Inheritance Tax estate. So his purchase of the smaller interest (i.e. the reversion) in that property does not add anything to that estate and yet he has paid £5,000 for the reversion. The payment is a transfer of value.