Section 54 Exceptions from charge on death

United Kingdom

(1)

Where a person is entitled to an interest in possession in settled property which on his death, but during the settlor’s life, reverts to the settlor, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

(2)

Where on the death of a person entitled to an interest in possession in settled property—

(a)

the settlor’s spouse F1or civil partner, or

(b)

if the settlor has died less than two years earlier, the settlor’s widow or widower F2or surviving civil partner,

becomes beneficially entitled to the settled property and is F3a long-term UK resident, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

F4(2A)

Where a person becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property, subsections (1) and (2) above apply in relation to the interest only if it is—

(a)

a disabled person's interest, or

(b)

a transitional serial interest.

(2B)

Where—

(a)

a person (“B”) becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property,

(b)

B dies,

(c)

the interest in possession, throughout the period beginning with when B becomes beneficially entitled to it and ending with B's death, is an immediate post-death interest,

(d)

the settlor died before B's death but less than two years earlier, and

(e)

on B's death, the settlor's widow or widower, or surviving civil partner, becomes beneficially entitled to the settled property and is F5a long-term UK resident,

the value of the settled property shall be left out of account in determining for the purposes of this Act the value of B's estate immediately before his death.

F6(2C)

Where—

(a)

a person who is entitled to an interest in possession in settled property dies,

(b)

the settled property became comprised in the settlement before 30 October 2024,

(c)

immediately before 30 October 2024, the settled property was excluded property by virtue of section 48(3) or (3A) (as it had effect at that time),

(d)

the person became beneficially entitled to the interest before 30 October 2024, and

(e)

immediately before the person’s death, the settled property—

(i)

was situated outside the United Kingdom and was not property to which paragraph 2 or 3 of Schedule A1 applied (overseas property with value attributable to UK residential property F7or UK agricultural property), or

(ii)

was a holding in an authorised unit trust or a share in an open-ended investment company,

the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the person’s estate immediately before their death.

(2D)

Where a person became beneficially entitled to an interest in possession in settled property on or after 22 March 2006, subsection (2C) applies in relation to the interest only if it is—

(a)

an immediate post-death interest,

(b)

a disabled person’s interest, or

(c)

a transitional serial interest,

or falls within section 5(1B) (certain interests acquired with no gratuitous benefit).

(3)

Subsections (5) and (6) of section 53 above shall apply in relation to subsections F8(1), (2) and (2B) above as they apply in relation to section 53(3) and (4) F9, but as if the reference in section 53(5)(a) above to section 53(4)(b) above were to subsection (2)(b) or (2B) above. .

(4)

For the purposes of this section, where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.

Annotations

Textual amendments

F1: Words in s. 54(2)(a) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 14(a)
F2: Words in s. 54(2)(b) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 14(b)
F3: Words in s. 54(2) substituted (6.4.2025) by Finance Act 2025 (c. 8), Sch. 13 paras. 9(2), 45(1)
F4: S. 54(2A)(2B) inserted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras 7, 15(2)
F5: Words in s. 54(2B)(e) substituted (6.4.2025) by Finance Act 2025 (c. 8), Sch. 13 paras. 9(2), 45(1)
F6: S. 54(2C)(2D) inserted (6.4.2025) by Finance Act 2025 (c. 8), Sch. 13 paras. 9(3), 45(1)
F7: Words in s. 54(2C)(e)(i) inserted (with effect in accordance with Sch. 12 para. 20 of the amending Act) by Finance Act 2026 (c. 11), Sch. 12 paras. 19(4), 20
F8: Words in s. 54(3) substituted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 7, 15(3)(a)
F9: Words in s. 54(3) added (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 7, 15(3)(b)

Notes on the whole Act

Textual amendments

F1: By Finance Act 1986 s. 100(1), on and after 25 July 1986 the Capital Transfer Tax Act 1984 may be cited as the Inheritance Tax Act 1984.

Notes on Chapter II

Textual amendments

F1: Words in the title of Chapter II substituted (24.7.2002 with effect in relation to transfers of value on or after 17.4.2002) by virtue of 2002 c. 23, s. 119(5)(6)