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HMRC have recently written to a number of firms expressing the view that where a pre-22 March 2006 life interest comes to an end and is replaced, before 6 April 2008, by a transitional serial interest in favour of the same life tenant, the provisions of IHTA 1984, s 53(2A) should be read as meaning that an immediately chargeable transfer occurs on that occasion so that relief under s 53(2) is not available.
The Chartered Institute of Taxation says that if this view is correct, such a charge would also arise on the creation of other (non-TSI) interests in possession for the pre-22 March 2006 life tenant.
The issue has been raised by the CIOT and STEP with HMRC as a matter of urgency, as this view does not appear to be correct and is inconsistent with the response which HMRC gave to question 6 of the memorandum of questions put to HMRC on Sch 20 by STEP and CIOT (as published on the CIOT website, www.tax.org.uk, on 4 April 2007).
The CIOT and STEP therefore recommend that advisers consider the implications of HMRC's view before creating transitional serial interests or other interests in possession in favour of pre-22 March 2006 life tenants.
CIOT technical department note dated 20 September 2007
