Inheritance Tax Act 1984 (c. 51)

PART V U.K. MISCELLANEOUS RELIEFS

CHAPTER V U.K. MISCELLANEOUS

Pension schemes, etc U.K.

151 Treatment of pension rights, etc. U.K.

(1) This section applies to any fund to which section [F1 615(3) of the Taxes Act 1988] applies, to any scheme approved under section [F2 620 or 621] of that Act, to any exempt approved scheme or statutory scheme as defined in Chapter [F3 I of Part XIV of that Act] and to any other sponsored superannuation scheme as defined in section [F4 624 of that Act].

[F5 (1A) This section also applies to approved personal pension arrangements within the meaning of Chapter [F6 IV of Part XIV of the Taxes Act 1988]; and references in the following provisions of this section to a scheme shall be construed accordingly.]

(2) An interest in or under a fund or scheme to which this section applies which comes to an end on the death of the person entitled to it shall be left out of account in determining for the purposes of this Act the value of his estate immediately before his death, if the interest—

(a) is, or is a right to, a pension or annuity, and

(b) is not an interest resulting (whether by virtue of the instrument establishing the fund or scheme or otherwise) from the application of any benefit provided under the fund or scheme otherwise than by way of a pension or annuity.

(3) Sections 49 to 53 above shall not apply in relation to an interest satisfying the conditions of paragraphs (a) and (b) of subsection (2) above.

(4) In relation to an interest in or under a fund or scheme to which this section applies, section 5(2) above shall apply as if the words “other than settled property” were omitted (in both places).

(5) Where a benefit has become payable under a fund or scheme to which this section applies, and the benefit becomes comprised in a settlement made by a person other than the person entitled to the benefit, the settlement shall for the purposes of this Act be treated as made by the person so entitled.

Textual Amendments

F1 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“218 of the Taxes Act”.

F2 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“226 or 226A”.

F3 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“II of Part II of the Finance Act 1970”.

F4 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“226(11) of the Taxes Act”.

F5 Finance Act 1987 (No.2) s. 98(4),with effect from 23July 1987.

F6 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“II of Part I of the Finance (No.2) Act 1987”.

Yn ddilys o 06/04/2006

151A Person dying with alternatively secured pension fund U.K.

(1) This section applies where a member of a registered pension scheme has an alternatively secured pension fund in respect of an arrangement under the pension scheme immediately before his death.

(2) In determining for the purposes of this Act the value of his estate immediately before his death he shall be treated as if he had been beneficially entitled to property with a value equal to the relevant amount.

(3) The relevant amount is—

(a) the aggregate of the amount of the sums and the value of the assets forming part of the member's alternatively secured pension fund immediately before his death, less

(b) the aggregate of the amount of the sums and the value of the assets expended on dependants' benefits within the period of six months beginning with the end of the month in which his death occurs.

(4) For this purpose sums or assets are expended on dependants' benefits at any time if they (or sums or assets directly or indirectly deriving from them) are at that time—

(a) applied towards the provision of a dependants' scheme pension for a relevant dependant,

(b) applied towards the provision of a dependants' annuity for a relevant dependant,

(c) designated as available for the payment of dependants' unsecured pension to a relevant dependant, or

(d) designated as available for the payment of dependants' alternatively secured pension to a relevant dependant,

or if the sums (or sums directly or indirectly deriving from the sums or assets) are at that time paid as a charity lump sum death benefit.

(5) In this section—

• “alternatively secured pension fund” has the same meaning as in Part 4 of the Finance Act 2004 (see paragraph 11 of Schedule 28 to that Act);

• “charity lump sum death benefit” has the meaning given by paragraph 18 of Schedule 29 to that Act;

• “dependants' alternatively secured pension” has the meaning given by paragraph 19 of Schedule 28 to that Act;

• “dependants' annuity” has the same meaning as in Part 4 of that Act (see paragraph 17 of that Schedule);

• “dependants' scheme pension” has the same meaning as in that Part of that Act (see paragraph 16 of that Schedule);

• “dependants' unsecured pension” has the meaning given by paragraph 18 of that Schedule; and

• “relevant dependant”, in relation to a member of a registered pension scheme who dies, means a dependant (within the meaning of paragraph 15 of that Schedule) who—

  (a)

  is the person's spouse or civil partner immediately before his death; or

  (b)

  is financially dependent on the person at that time.

Yn ddilys o 06/04/2006

151B Relevant dependant with pension fund inherited from member over 75 U.K.

(1) This section applies where—

(a) a relevant dependant of a person who, immediately before his death, was a member of a registered pension scheme has a dependant's unsecured pension fund, or a dependant's alternatively secured pension fund, in respect of an arrangement under the pension scheme immediately before his death or immediately before ceasing to be a relevant dependant of the member,

(b) the member had reached the age of 75 at the time of his death and had an alternatively secured pension fund in respect of an arrangement under the pension scheme immediately before his death, and

(c) sums or assets forming part of that fund were designated as available for the payment of dependants' unsecured pension, or dependants' alternatively secured pension, to the relevant dependant within the period of six months beginning with the end of the month in which the member's death occurs.

(2) Where this section applies tax shall be charged under this section.

(3) The amount on which tax is charged under this section shall be the aggregate of the amount of the sums and the value of the assets forming part of the dependant's unsecured pension fund, or the dependant's alternatively secured pension fund, in respect of the arrangement immediately before the relevant dependant died or ceased to be a relevant dependant of the member.

(4) But where tax is chargeable under this section by reason of the death of the relevant dependant, that amount is reduced by so much of sums forming part of the dependant's unsecured pension fund, or the dependant's alternatively secured pension fund, (or sums directly or indirectly deriving from sums or assets forming part of that fund) as are paid to a charity within the period of six months beginning with the end of the month in which his death occurs.

(5) Tax charged under this section shall be charged at the rate or rates at which it would have been charged on the death of the member if—

(a) the amount mentioned in subsection (3) above (as reduced under subsection (4) above) had been included in the value transferred by the chargeable transfer made on his death, and

(b) the amount on which the tax is charged had formed the highest part of that value.

(6) In this section—

• “alternatively secured pension fund” has the same meaning as in Part 4 of the Finance Act 2004 (see paragraph 11 of Schedule 28 to that Act);

• “dependants' alternatively secured pension” has the meaning given by paragraph 19 of that Schedule;

• “dependant's alternatively secured pension fund” has the same meaning as in that Part of that Act (see paragraph 25 of that Schedule);

• “dependants' unsecured pension” has the meaning given by paragraph 18 of that Schedule;

• “dependant's unsecured pension fund” has the same meaning as in that Part of that Act (see paragraph 22 of that Schedule); and

• “relevant dependant”, in relation to a member of a registered pension scheme who dies, means a dependant (within the meaning of paragraph 15 of that Schedule) who—

  (a)

  is the person's spouse or civil partner immediately before his death; or

  (b)

  is financially dependent on the person at that time.

Yn ddilys o 19/07/2007

[F7 151BA Rate or rates of charge under section 151B U.K.

(1) Tax charged under section 151B above shall be charged at the rate or rates at which it would be charged on the death of the member if the amount mentioned in subsection (3) of that section (as reduced under subsection (4) of that section) (“the taxable amount”) had been included in the aggregate mentioned in section 151A(3)(a) above (but subject as follows).

(2) The rate or rates at which tax is charged on the taxable amount shall be determined as if the taxable amount had formed the very highest part of the value of the member's estate immediately before the member's death (above any amount which is part of that value apart from this section).

(3) The rate or rates at which tax is charged on the taxable amount shall be determined on the assumptions that—

(a) subsection (3)(b) of section 151A above were omitted, and

(b) the references in subsections (4A) and (5) of that section to the time when tax is charged on the transfer treated as made by the member on death were to the time when tax is charged under this section.

(4) Subsection (5) below applies where, before the time when the dependant dies or ceases to be a relevant dependant, there have been one or more reductions of tax by virtue of the coming into force of a substitution of a new Table in Schedule 1 to this Act since the member's death.

(5) The rate or rates at which tax is charged under section 151B above is to be determined as if the new Table effecting the reduction of tax (or the most recent reduction of tax) had been in force at the time of the member's death.]

Textual Amendments

F7 S. 151BA inserted (with effect as mentioned in Sch. 19 para. 29(8) of the amending Act) by Finance Act 2007 (c. 11), s. 69, Sch. 19 para. 22

Yn ddilys o 06/04/2006

151C Dependant dying with other pension fund U.K.

(1) This section applies where—

(a) a dependant of a member of a registered pension scheme has a dependant's alternatively secured pension fund in respect of an arrangement under the pension scheme immediately before his death, and

(b) section 151B above does not apply.

(2) In determining for the purposes of this Act the value of the dependant's estate immediately before his death he shall be treated as if he had been beneficially entitled to property with a value equal to the relevant amount.

(3) The relevant amount is—

(a) the aggregate of the amount of the sums and the value of the assets forming part of the dependant's alternatively secured pension fund immediately before his death, less

(b) so much of sums forming part of the dependant's alternatively secured pension fund (or sums directly or indirectly deriving from sums or assets forming part of that fund) as are paid as a charity lump sum death benefit within the period of six months beginning with the end of the month in which his death occurs.

(4) In this section—

• “charity lump sum death benefit” has the meaning given by paragraph 18 of Schedule 29 to the Finance Act 2004;

• “dependant” has the meaning given by paragraph 15 of that Schedule 28 to that Act; and

• “dependant's alternatively secured pension fund” has the same meaning as in Part 4 of that Act (see paragraph 25 of Schedule 28 to that Act).

Yn ddilys o 21/07/2008

[F8 151D Unauthorised payment where person dies over 75 with pension or annuity U.K.

(1) This section applies where—

(a) a member of a registered pension scheme, or a dependant of such a member, dies after reaching the age of 75;

(b) immediately before death the member or dependant has under the pension scheme an actual right to payments under a relevant pension or relevant annuity or a prospective right to payments under a relevant pension; and

(c) at any time after the death a relevant unauthorised payment is made by the pension scheme.

(2) Where this section applies tax shall be charged under this section.

(3) The amount on which tax is charged under this section shall be the difference between—

(a) the amount of the relevant unauthorised payment; and

(b) the amount of any liability to income tax which has arisen under Part 4 of the Finance Act 2004 by virtue of the making of the relevant unauthorised payment.

(4) In this section—

• “dependant” has the meaning given by paragraph 15 of Schedule 28 to the Finance Act 2004;

• “dependants' annuity” has the same meaning as in that Part of that Act (see paragraph 17 of that Schedule);

• “dependants' scheme pension” has the same meaning as in that Part of that Act (see paragraph 16 of that Schedule);

• “lifetime annuity” has the same meaning as in that Part of that Act (see paragraph 3 of that Schedule);

• “relevant annuity” means a lifetime annuity or dependants' annuity purchased by the application of sums or assets held for the purposes of the pension scheme;

• “relevant pension” means a scheme pension or dependants' scheme pension provided by the scheme administrator or as a result of the application of sums or assets held for the purposes of the pension scheme;

• “relevant unauthorised payment” means an unauthorised payment (within the meaning of Part 4 of the Finance Act 2004: see section 160(5) of that Act) which—

  (a)

  consists of the payment of a lump sum in respect of the dead member or dependant; or

  (b)

  is treated as made by virtue of the operation of section 172B of that Act by reason of the death; and

• “scheme pension” has the same meaning as in Part 4 of that Act (see paragraph 2 of Schedule 28 to that Act).]

Textual Amendments

F8 Ss. 151D, 151E inserted (with effect as mentioned in Sch. 28 para. 15(3) of the amending Act) by Finance Act 2008 (c. 9), s. 91, Sch. 28 para. 10

Yn ddilys o 21/07/2008

[F8 151E Rate or rates of charge under section 151D U.K.

(1) Tax charged under section 151D above shall be charged at the rate or rates at which it would be charged if the amount on which it is charged, and any amount on which tax was previously charged under that section in relation to the death of the member or dependant, were part of the value transferred by the transfer of value made on the death of the member or dependant.

(2) The rate or rates at which tax is charged on that amount shall be determined as if that amount had formed the highest part of that value.

(3) Subsection (4) below applies where, before the time when the unauthorised payment is made, there have been one or more reductions of tax by virtue of the coming into force of a substitution of a new Table in Schedule 1 to this Act since the death of the member or dependant.

(4) The rate or rates at which tax is charged under section 151D above is to be determined as if the new Table effecting the reduction of tax (or the most recent reduction of tax) (“the applicable Table”) had been in force at the time of the death of the member or dependant, but subject to subsections (5) and (8) below.

(5) The nil-rate band maximum in the applicable Table is to be treated for the purposes of this section as reduced by the used-up percentage of the difference between—

(a) that nil-rate band maximum, and

(b) the nil-rate band maximum which was actually in force at the time of the death of the member or dependant.

(6) For the purposes of subsection (5) above “the used-up percentage” is—

where—

E is the amount by which M is greater than VT under section 8A(2) above in the case of the member or dependant; and

NRBM is the nil-rate band maximum at the time of the death of the member or dependant.

(7) The following provisions apply where—

(a) tax is charged under section 151D above, and

(b) immediately before the death of the member or dependant, the member or dependant had a spouse or civil partner (“the survivor”).

(8) If the survivor died before the time when the unauthorised payment is made, tax is charged as if the personal nil-rate band maximum of the member or dependant were appropriately reduced.

(9) In subsection (8) above—

• “the personal nil-rate band maximum of the member or dependant” is the nil rate band maximum in the applicable Table, increased in accordance with section 8A above where that section effected an increase in that nil-rate band maximum in the case of the member or dependant (as a survivor of another deceased person), and

• “appropriately reduced” means reduced by the amount (if any) by which the amount on which tax was charged at the rate of nil per cent. on the death of the survivor was increased by reason of the operation of section 8A above by virtue of the position of the member or dependant.

(10) If the survivor did not die before the time when the unauthorised payment is made, tax is to be charged on the death of the survivor as if the percentage referred to in section 8A(3) above in the case of the member or dependant were that specified in subsection (11) below.

(11) That percentage is—

where—

AE is the adjusted excess, that is the amount by which M would be greater than VT under section 8A(2) above in the case of the member or dependant if—

• (a) the amount on which tax is charged under section 151D above were included in the value transferred by the chargeable value made on the death of the member or dependant, and

• (b) the nil-rate band maximum at the time of the death were ANRBM; and

ANRBM is the adjusted nil-rate band maximum, that is the nil-rate band maximum in the applicable Table (as reduced under subsection (5) above where that subsection applies).]

Textual Amendments

F8 Ss. 151D, 151E inserted (with effect as mentioned in Sch. 28 para. 15(3) of the amending Act) by Finance Act 2008 (c. 9), s. 91, Sch. 28 para. 10

152 Cash options. U.K.

Where—

[F9 (a) under approved personal pension arrangements within the meaning of Chapter [F10 IV of Part XIV of the Taxes Act 1988], or

(b) under a contract or trust scheme approved by the Board under section [F11 620 or 621 of the Taxes Act 1988] or (before [F12 6th April 1970] under section 22 of the M1 Finance Act 1956]

an annuity becomes payable on a person’s death to a widow, widower or dependant of that person, and under the terms of the contract or scheme a sum of money might at his option have become payable instead to his personal representatives, he shall not, by virtue of section 5(2) above, be treated as having been beneficially entitled to that sum.

Textual Amendments

F9 Finance Act 1987 (No.2) s. 98(5),with effect from 23July 1987.Originally

“under a contract or trust scheme approved by the Board under section 226 or 226A of the Taxes Act or (before the commencement of that Act) under section 22 of the Finance Act 1956 (retirement annuities)”.

F10 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“II of Part I of the Finance (No. 2) Act 1987”.

F11 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“226 or 226A of the Taxes Act”.

F12 Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“The commencement of that Act”.

Marginal Citations

M1 1956 c. 54.

153 Overseas pensions. U.K.

(1) In determining for the purposes of this Act the value of a person’s estate immediately before his death there shall be left out of account any pension payable under the regulations or rules relating to any fund vested in Commissioners under section 273 of the M2 Government of India Act 1935 or to any fund administered under a scheme made under section 2 of the M3 Overseas Pensions Act 1973 which is certified by the Secretary of State for the purpose of this section to correspond to an Order in Council under subsection (1) of the said section 273.

(2) For the purposes of this Act—

(a) a pension paid under the authority of a scheme made under section 2 of the Overseas Pensions Act 1973 which is constituted by the M4 Pensions (India, Pakistan and Burma) Act 1955 or is certified by the Secretary of State for the purposes of this section to correspond to the said Act of 1955 shall be treated as if it had been paid by the Government of India or the Government of Pakistan (according as the arrangements in pursuance of which the pension was first paid under the said Act of 1955 were made with the one or the other Government);

(b) a pension paid out of any fund established in the United Kingdom by the Government of any country which, at the time when the fund was established, was, or formed part of, a colony, protectorate, protected state or United Kingdom trust territory shall, if the fund was established for the sole purpose of providing pensions, whether contributory or not, payable in respect of service under the Government be treated as if it had been paid by the Government by which the fund was established;

(c) a pension paid out of the Central African Pension Fund established by section 24 of the M5 Federation of Rhodesia and Nyasaland (Dissolution) Order in Council 1963 shall be treated as if it had been paid by the Government of a territory outside the United Kingdom; and

(d) so much of any pension paid to or in respect of any person under—

(i) the scheme which by virtue of subsection (3) of section 2 of the Overseas Pensions Act 1973 is constituted under that section by section 2 or subsection (2) of section 4 of the M6 Overseas Service Act 1958, or

(ii) such other scheme made under section 2 of the Overseas Pensions Act 1973 as is certified by the Secretary of State for the purposes of the Taxes Act to correspond to section 2 or subsection (2) of section 4 of the Overseas Service Act 1958,

as is certified by the Secretary of State to be attributable to service under the Government of an overseas territory shall be treated as if it had been paid by the Government of that territory.

(3) Subsection (1) above shall be construed as if contained in section 273 of the M7 Government of India Act 1935; and for the purposes of subsection (2) above—

(a) “pension” includes a gratuity and any sum payable on or in respect of death, and a return of contributions with or without interest thereon or any other addition thereto;

(b) “United Kingdom trust territory” means a territory administered by the Government of the United Kingdom under the trusteeship system of the United Nations;

(c) “overseas territory” means any country or territory outside the United Kingdom;

(d) references to the Government of any such country or territory as is mentioned in paragraph (b) or (d) of that subsection include a Government constituted for two or more such countries or territories and any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such countries or territories.

(4) If, by reason of Her Majesty’s Government in the United Kingdom having assumed responsibility for a pension, allowance or gratuity within the meaning of section 1 of the M8 Overseas Pensions Act 1973, payments in respect of it are made under that section, this section shall apply in relation to the pension, allowance or gratuity, exclusive of so much (if any) of it as is paid by virtue of the application to it of any provisions of the M9 Pensions (Increase) Act 1971 or any enactment repealed by that Act, as if it continued to be paid by the Government or other body or fund which had responsibility for it before that responsibility was assumed by Her Majesty’s Government in the United Kingdom.

Marginal Citations

M2 1935 c. 2.

M3 1973 c. 21.

M4 1955 c. 22.

M5 S.I. 1963/2085.

M6 1958 c. 14.

M7 1935 c. 2.

M8 1973 c. 21.

M9 1971 c. 56.