Section 104 of the Finance Act 1986 confers power to make provision by regulations for avoiding double charges to inheritance tax with respect to transfers of value made, and other events occurring, on or after 18th March 1986. Those powers were exercised in the Inheritance Tax (Double Charges Relief) Regulations 1987 (S.I. 1987/1130) and in the Charge to Income Tax by Reference to Enjoyment of Property Previously Owned Regulations 2005 (S.I. 2005/724) (see regulation 6 of those Regulations). Those powers are further exercised in these Regulations.

The Regulations apply where an individual (“the deceased”) enters into arrangements under which there are transfers both of property (“the relevant property”) and of a debt owed to the deceased (“the debt”); the debt is then written off; and, on the deceased’s death on or after 6th April 2005, both the relevant property (or any property then representing the chargeable property) and the debt are chargeable to inheritance tax.

Where these Regulations apply, two separate amounts must be calculated. The first amount is the inheritance tax chargeable on the deceased’s death, but disregarding the value transferred represented by the relevant property (or by any property then representing that property). The second amount is the inheritance tax chargeable on the deceased’s death, but disregarding the value transferred represented by the debt. The total inheritance tax chargeable is then reduced to the first amount or to the second amount (whichever is the greater).