Estate not diminished

Transfer of reversionary interest

The taxpayers’ father made arrangements to reduce the inheritance tax payable on his estate after his death. These involved the transfer of a reversionary interest in an Isle of Man trust to the DSF Trust of which the taxpayers were the trustees. The father died in February 2011 and the taxpayers were appointed executors of his estate.

HMRC issued a determination on the basis that inheritance tax was due as a result of the transfer of the reversionary interest to the trust. The taxpayers said the reversionary interest was excluded property because no consideration had been given for its acquisition and in any event there had been no transfer of value when it had been transferred to the trust.

The First-tier Tribunal noted that the relevant provision on the excluded property point was IHTA 1984 s 48(1) which states ‘a reversionary interest...