The history of inheritance taxes in the United Kingdom has undergone significant change and mutation since their original introduction in 1694.
Probate duty was introduced as part of the Stamps Act 1694, in order to help finance England's involvement in the War of the League of Augsburg. [1] It originally applied to all probates of wills and letters of administration for personal estates valued greater than £20, at a fixed duty of 5 s. (one crown, or a quarter of a pound). [1] It was converted into a graduated rate in 1780 by Lord North, as a consequence of financing British activity in the American Revolutionary War. [1] Penalties for failing to file probate or administration documents were introduced in 1795, and accounts for calculating liability were first required in 1805. [2] As probate and administration were unknown in Scotland, inventory duty was introduced in 1804 to provide for similar liability there. [3] Ireland introduced probate duty separately in 1774. [4]
Legacy duty was also imposed in 1780, initially upon receipts or discharges given with respect to a legacy. As receipts were not in practice given or required, [5] revenues were insignificant until William Pitt the Younger reformed the regime to require executors to account for the property in question, as well as varying rates according to the type of collateral succession. [6] Further measures and later court decisions clarified the duty's extent.
Probate and legacy duty focused on the legacy of the estate, as opposed to its devise, thus excluding real property from taxation. [7] Neither duty captured property passing by way of settlement, which was outside the scope of probate and administration. [7] Succession duty was introduced by William Gladstone as a measure to capture more unearned wealth at the point of succession that would not otherwise be chargeable to legacy duty. In that regard, real property was included in its scope, but only on the life interest therein, as opposed to its full market value. [8] Leasehold interests were excluded from legacy duty, thus having them fall within the new duty. [9]
The administration of legacy and succession duties was integrated in 1881, [10] with the requirement that no probate or letters of administration would be granted by the court if a court officer cannot certify that an affidavit has been filed stating the estate's value and stamped where liability for duty is shown. [11] Relief from legacy and succession duties at the rate of 1% was allowed on such affidavits and inventories filed and stamped, [12] and a penalty equal to double the amount of duty due was imposed on any person failing to file them on time. [13] Account duty was also introduced, charging certain gifts and voluntary settlements to be taxed. [12]
Additional succession duties were introduced in 1888: [14]
Corporation duty was imposed in 1885, [15] and a temporary estate duty in 1889 (intended to last until 1896), [16] to encompass activities which the previous duties had not captured.
Duty | Scope | Paid | Rate |
---|---|---|---|
Probate duty [a 1] |
|
|
But, where the gross value of the personal estate is less than £300, a flat rate duty of 30 s. is payable on such estates valued between £100 and £300, which also satisfies any liability for legacy or succession duty. |
Legacy duty |
|
|
Where any legacy, [a 3] residue or any share of residue is greater than £20: [a 4]
|
Succession duty |
Applies to every succession (conferred by disposition or operation of law) to the beneficial enjoyment of any real or personal property, or to the receipt of any portion or additional portion of the income or profits thereof, upon or in consequence of the death of any person. [29]
However:
|
The value to be included is:
|
|
Account duty |
Personal or moveable property, being:
|
|
Any stamp duty of 5 s. per £100 (i.e., 0.25%) previously paid on a deed of voluntary arrangement of property included in the account is to be returned upon production of the settlement. |
Corporation duty |
Income (less applicable expenses) earned from all real and personal property vested in a body corporate or unincorporate, other than property vested in: [42]
Property acquired by subject bodies corporate or unincorporate with funds contributed within the previous 30 years, whether voluntarily contributed or where legacy or succession duty had been paid thereon, is exempt from such duty. [42] "Body unincorporate" includes every unincorporated company, fellowship, society, and association. It also includes a trustee or trustees of a permanent trust into which property has been vested in circumstances where it was not liable to legacy or succession duty. [43] |
|
|
Estate duty |
Estates and successions greater than £10,000 in value [45] |
|
|
The succession duty's taxation of the life interest in real property, as opposed to its full capital value, was seen to be unfair to heirs of different ages, as elder heirs effectively received a life interest that was lower in value than one received by a younger heir, even when they were shares in the same property. [46]
In his famous 1894 budget, [47] William Harcourt further noted the unfairness of the system that had developed:
The whole system is admittedly difficult and complicated. The Death Duties have grown up piecemeal, and bear traces of their fragmentary origin. They have never been established upon any general principles, and they present an extraordinary specimen of tessellated legislation. Various measures have been made at different times to redress some of their inequalities. Here a patch and there a patch, but each successive modification has only left confusion worse compounded. [48]
In the Finance Act 1894 ( 57 & 58 Vict. c. 30), estate duty replaced probate duty, account duty, certain additional succession duties, and the 1889 estate duty. [49] [b] It was collected in addition to the legacy duty and succession duty which still remained in effect.
With respect to real property, succession duty ceased to be calculated on the value of the life interest in the succession, being instead based on the principal value of the property after deducting the liability for related estate duty, together with expenses incurred in raising funds for paying it. [52]
Duty | Scope | Paid by | Rate in 1894 |
---|---|---|---|
Estate duty [53] | All property passing on the death of the deceased, at its market value at the date of death, including:
In this regard, "property passing on the death" includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and the expression "on the death" includes "at a period ascertainable only by reference to the death". [54] However, the following property is exempt from duty: [55]
|
The estate, but:
|
Where the principal value of the estate: [57]
For small estates, the following reliefs apply: [58]
|
Settlement estate duty | Additional duty, charged where property in respect of which estate duty is leviable is settled by will of the deceased, or having been settled by some other disposition is passed on death of the deceased, to some other person not competent to dispose of the property. [59] | 1% for every £10 of the value of the settlement, or part thereof where such part is deemed to be a full £10 |
Settlement estate duty was increased to 2% by the Finance Act 1909–10, and was later abolished by the Finance Act 1914. [60]
Estate duty was designed to be a progressive tax. It became more highly progressive over time, with the highest marginal rates fixed as follows:
The complexity and unfairness in how the duties were applied was discussed by Stafford Cripps in his 1949 Budget speech:
The Legacy and Succession Duties also have the drawback that they impose a proportionately heavier burden on the small than on the large estate. For example, an estate of £6,000, passing wholly to brothers and sisters, pays a total charge of 3 per cent. Estate Duty and 10 per cent. Legacy and Succession Duties, equivalent to a rate of nearly 13 per cent., or 10 per cent over the Estate Duty rate; whereas, at the other extreme, an estate of £3 million would pay only 2½ per cent. over the rate of Estate Duty. It is, no doubt, because of this unequal incidence of the duty that testators, in fact, leave about two-thirds of the total legacies and bequests free of duty, and in all such cases the Legacy and Succession Duties merely become a wholly illogical, extra Estate Duty, falling upon the residue. [70]
Accordingly, legacy duty and succession duty were abolished by the Finance Act 1949, [e] followed by the repeal of corporation duty by the Finance Act 1959. The three-year period for gifts made prior to death was extended to five years by the Finance Act 1946, and then to seven years by the Finance Act 1969.
Estate duty became more progressive in scale, eventually peaking in 1969 with the highest marginal rate fixed at 85% of amounts in excess of £750,000, provided that total duty did not exceed 80% of the value of the total estate. [71]
Estate duty was criticised for failing to capture the value of gifts made more than seven years before a person's death, as well as that of any property vested in trusts prior to death. In his 1974 Budget speech, Denis Healey, then Chancellor of the Exchequer, declared:
Nothing is more offensive to the vast majority of ordinary taxpayers, most of whom are subject to PAYE, than the knowledge that people far better off than themselves are avoiding taxation by exploiting loopholes in the existing law. If the existing estate duty operated effectively, the great concentrations of private wealth would already have been broken up and with them many of the unfair advantages enjoyed by generation after generation of the heirs and relatives of wealthy men. In practice, however, the estate duty has always been a largely avoidable, indeed, a voluntary, tax. In particular, it does not bite on transfers of wealth made long enough before death to fall outside the charge.... I therefore propose to introduce this year in my second Finance Bill a tax on lifetime gifts—that is, any transactions containing an element of bounty and including gifts in settlement—which will mesh in with the existing estate duty so as effectively to replace it with a comprehensive tax on all transmissions of personal wealth. [72]
This was implemented with the passage of the Finance Act 1975, which abolished estate duty [f] and created the capital transfer tax, with the following characteristics:
CTT was reduced in scope during the Thatcher years, [80] with the rates applicable to gifts adjusted to encourage business property to be given during a lifetime, and a ten-year accumulation period introduced to cap the effect of graduated rates. [81]
Nigel Lawson, in his 1986 Budget speech, moved to abolish the tax on lifetime gifts altogether, explaining:
My last proposal in this section concerns capital transfer tax which, ever since its introduction by the Labour Government in 1974, has been a thorn in the side of those owning and running family businesses, and as such has had a damaging effect on risk taking and enterprise within a particularly important sector of the economy. In addition to statutory indexation of the threshold and rate bands, I propose this year to reform the tax radically.
In essence, the capital transfer tax is two taxes, as its two separate scales imply: an inheritance tax and a lifetime gifts tax. We have had an inheritance tax in some shape or form ever since Sir William Harcourt introduced his estate duty in 1894. But the lifetime gifts tax which the Labour Government introduced in 1974, in the teeth of united Conservative opposition, is an unwelcome and unwarranted impost. By deterring lifetime giving, it has had the effect of locking in assets, particularly the ownership of family businesses, often to the detriment of the businesses concerned.
Accordingly, I propose to abolish entirely the tax on lifetime gifts to individuals. As with the old estate duty, there will be a tapered charge on gifts made within seven years of death and provisions to charge gifts made with reservation; and the regime for trusts, which is needed as a protection for the death charge, will be kept broadly unchanged.... In recognition of the radically changed nature of the tax, I have decided to rename it the inheritance tax. [82]
This was implemented in the Finance Act 1986.
For IHT purposes, a person's estate includes: [83]
Excluded property comprises: [84]
Relief is also granted, [85] where the value of the estate is reduced with respect to specified business property, agricultural property, woodlands, certain transfers made within three years of death made at a diminished value, and certain other cases.
Deductions will be made from an estate's nil rate band with respect to transfers of value made in excess of specified limits, [86] other than "potentially exempt transfers" made more than seven years before the transferor's death. Transfers of value made within specified limits are known as "exempt transfers". [87]
Transfers of value will also include gifts arising from the amount by which an asset is sold for less than it could have been sold on the open market, as for a sale from a parent to a child. [88] Gifts can also arise where: [89]
Where the value of such transfers exhausts the amount available to the nil rate band, IHT is assessed on the excess amount, to which the recipients of such transfers bear the liability to pay. [86]
Tax is assessed at 40% of the net value of the estate, after application of the nil rate band. [90] The applicable nil rate band will depend on the date of death: if the date falls at any time from 6 August to 5 April in a given tax year, the current year's band will apply; but, where the date is after 5 April but before 6 August, and application for a grant is filed before 6 August, the prior year's band will apply. [91]
For deaths occurring after 5 April 2012, the tax is assessed at 36%, where at least 10% of a specified baseline amount of the estate has been bequeathed as charitable gifts. [92] For purposes of calculation, the property of the estate is separated into three components, each of which is tested to see if the charitable gifts are sufficient to qualify for the lesser rate: [93]
If applicable gifts meet the 10% threshold for a given component, in certain circumstances, upon election, the 36% rate applies to the whole estate. [94] There are several options available for estates to be able to achieve that threshold, such as having the will specifying relevant gifts in terms of percentages of assets, or successors executing a deed of variation to attain the desired result. [95]
In the summer budget of 2015 a new measure was outlined to reduce the burden of IHT for most families by making it easier to pass on the family home to direct descendants without a tax charge. [96] It came into effect upon the passage of the Finance (No. 2) Act 2015, and provided for the following scheduled amounts: [97]
The Finance Act 2016 provided further relief in cases where all or part of the additional band could be lost, where a person had downsized to a less valuable residence or had ceased to own a residence after 8 July 2015 (and before the person has died). This is conditional upon the deceased having left that smaller residence, or assets of equivalent value, to direct descendants. [98] These are defined as lineal descendants, spouses or civil partners of such lineal descendants, or former spouses or civil partners who have not become anyone else's spouse or civil partner. [99]
Effective with the 2005-06 tax year, [100] the Finance Act 2004 introduced a retrospective income tax regime known as pre-owned asset tax (POAT) which covers transactions not made at arm's length, where a person either:
and then subsequently benefits from its use. [101]
The person liable for POAT may, while he is still alive, elect on a timely basis to have such transactions treated as gifts with reservations (thus subject to IHT) with respect to such transactions made in a given tax year. [102] [103]
The history of inheritance taxes in the United Kingdom has undergone significant change and mutation since their original introduction in 1694.
Probate duty was introduced as part of the Stamps Act 1694, in order to help finance England's involvement in the War of the League of Augsburg. [1] It originally applied to all probates of wills and letters of administration for personal estates valued greater than £20, at a fixed duty of 5 s. (one crown, or a quarter of a pound). [1] It was converted into a graduated rate in 1780 by Lord North, as a consequence of financing British activity in the American Revolutionary War. [1] Penalties for failing to file probate or administration documents were introduced in 1795, and accounts for calculating liability were first required in 1805. [2] As probate and administration were unknown in Scotland, inventory duty was introduced in 1804 to provide for similar liability there. [3] Ireland introduced probate duty separately in 1774. [4]
Legacy duty was also imposed in 1780, initially upon receipts or discharges given with respect to a legacy. As receipts were not in practice given or required, [5] revenues were insignificant until William Pitt the Younger reformed the regime to require executors to account for the property in question, as well as varying rates according to the type of collateral succession. [6] Further measures and later court decisions clarified the duty's extent.
Probate and legacy duty focused on the legacy of the estate, as opposed to its devise, thus excluding real property from taxation. [7] Neither duty captured property passing by way of settlement, which was outside the scope of probate and administration. [7] Succession duty was introduced by William Gladstone as a measure to capture more unearned wealth at the point of succession that would not otherwise be chargeable to legacy duty. In that regard, real property was included in its scope, but only on the life interest therein, as opposed to its full market value. [8] Leasehold interests were excluded from legacy duty, thus having them fall within the new duty. [9]
The administration of legacy and succession duties was integrated in 1881, [10] with the requirement that no probate or letters of administration would be granted by the court if a court officer cannot certify that an affidavit has been filed stating the estate's value and stamped where liability for duty is shown. [11] Relief from legacy and succession duties at the rate of 1% was allowed on such affidavits and inventories filed and stamped, [12] and a penalty equal to double the amount of duty due was imposed on any person failing to file them on time. [13] Account duty was also introduced, charging certain gifts and voluntary settlements to be taxed. [12]
Additional succession duties were introduced in 1888: [14]
Corporation duty was imposed in 1885, [15] and a temporary estate duty in 1889 (intended to last until 1896), [16] to encompass activities which the previous duties had not captured.
Duty | Scope | Paid | Rate |
---|---|---|---|
Probate duty [a 1] |
|
|
But, where the gross value of the personal estate is less than £300, a flat rate duty of 30 s. is payable on such estates valued between £100 and £300, which also satisfies any liability for legacy or succession duty. |
Legacy duty |
|
|
Where any legacy, [a 3] residue or any share of residue is greater than £20: [a 4]
|
Succession duty |
Applies to every succession (conferred by disposition or operation of law) to the beneficial enjoyment of any real or personal property, or to the receipt of any portion or additional portion of the income or profits thereof, upon or in consequence of the death of any person. [29]
However:
|
The value to be included is:
|
|
Account duty |
Personal or moveable property, being:
|
|
Any stamp duty of 5 s. per £100 (i.e., 0.25%) previously paid on a deed of voluntary arrangement of property included in the account is to be returned upon production of the settlement. |
Corporation duty |
Income (less applicable expenses) earned from all real and personal property vested in a body corporate or unincorporate, other than property vested in: [42]
Property acquired by subject bodies corporate or unincorporate with funds contributed within the previous 30 years, whether voluntarily contributed or where legacy or succession duty had been paid thereon, is exempt from such duty. [42] "Body unincorporate" includes every unincorporated company, fellowship, society, and association. It also includes a trustee or trustees of a permanent trust into which property has been vested in circumstances where it was not liable to legacy or succession duty. [43] |
|
|
Estate duty |
Estates and successions greater than £10,000 in value [45] |
|
|
The succession duty's taxation of the life interest in real property, as opposed to its full capital value, was seen to be unfair to heirs of different ages, as elder heirs effectively received a life interest that was lower in value than one received by a younger heir, even when they were shares in the same property. [46]
In his famous 1894 budget, [47] William Harcourt further noted the unfairness of the system that had developed:
The whole system is admittedly difficult and complicated. The Death Duties have grown up piecemeal, and bear traces of their fragmentary origin. They have never been established upon any general principles, and they present an extraordinary specimen of tessellated legislation. Various measures have been made at different times to redress some of their inequalities. Here a patch and there a patch, but each successive modification has only left confusion worse compounded. [48]
In the Finance Act 1894 ( 57 & 58 Vict. c. 30), estate duty replaced probate duty, account duty, certain additional succession duties, and the 1889 estate duty. [49] [b] It was collected in addition to the legacy duty and succession duty which still remained in effect.
With respect to real property, succession duty ceased to be calculated on the value of the life interest in the succession, being instead based on the principal value of the property after deducting the liability for related estate duty, together with expenses incurred in raising funds for paying it. [52]
Duty | Scope | Paid by | Rate in 1894 |
---|---|---|---|
Estate duty [53] | All property passing on the death of the deceased, at its market value at the date of death, including:
In this regard, "property passing on the death" includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and the expression "on the death" includes "at a period ascertainable only by reference to the death". [54] However, the following property is exempt from duty: [55]
|
The estate, but:
|
Where the principal value of the estate: [57]
For small estates, the following reliefs apply: [58]
|
Settlement estate duty | Additional duty, charged where property in respect of which estate duty is leviable is settled by will of the deceased, or having been settled by some other disposition is passed on death of the deceased, to some other person not competent to dispose of the property. [59] | 1% for every £10 of the value of the settlement, or part thereof where such part is deemed to be a full £10 |
Settlement estate duty was increased to 2% by the Finance Act 1909–10, and was later abolished by the Finance Act 1914. [60]
Estate duty was designed to be a progressive tax. It became more highly progressive over time, with the highest marginal rates fixed as follows:
The complexity and unfairness in how the duties were applied was discussed by Stafford Cripps in his 1949 Budget speech:
The Legacy and Succession Duties also have the drawback that they impose a proportionately heavier burden on the small than on the large estate. For example, an estate of £6,000, passing wholly to brothers and sisters, pays a total charge of 3 per cent. Estate Duty and 10 per cent. Legacy and Succession Duties, equivalent to a rate of nearly 13 per cent., or 10 per cent over the Estate Duty rate; whereas, at the other extreme, an estate of £3 million would pay only 2½ per cent. over the rate of Estate Duty. It is, no doubt, because of this unequal incidence of the duty that testators, in fact, leave about two-thirds of the total legacies and bequests free of duty, and in all such cases the Legacy and Succession Duties merely become a wholly illogical, extra Estate Duty, falling upon the residue. [70]
Accordingly, legacy duty and succession duty were abolished by the Finance Act 1949, [e] followed by the repeal of corporation duty by the Finance Act 1959. The three-year period for gifts made prior to death was extended to five years by the Finance Act 1946, and then to seven years by the Finance Act 1969.
Estate duty became more progressive in scale, eventually peaking in 1969 with the highest marginal rate fixed at 85% of amounts in excess of £750,000, provided that total duty did not exceed 80% of the value of the total estate. [71]
Estate duty was criticised for failing to capture the value of gifts made more than seven years before a person's death, as well as that of any property vested in trusts prior to death. In his 1974 Budget speech, Denis Healey, then Chancellor of the Exchequer, declared:
Nothing is more offensive to the vast majority of ordinary taxpayers, most of whom are subject to PAYE, than the knowledge that people far better off than themselves are avoiding taxation by exploiting loopholes in the existing law. If the existing estate duty operated effectively, the great concentrations of private wealth would already have been broken up and with them many of the unfair advantages enjoyed by generation after generation of the heirs and relatives of wealthy men. In practice, however, the estate duty has always been a largely avoidable, indeed, a voluntary, tax. In particular, it does not bite on transfers of wealth made long enough before death to fall outside the charge.... I therefore propose to introduce this year in my second Finance Bill a tax on lifetime gifts—that is, any transactions containing an element of bounty and including gifts in settlement—which will mesh in with the existing estate duty so as effectively to replace it with a comprehensive tax on all transmissions of personal wealth. [72]
This was implemented with the passage of the Finance Act 1975, which abolished estate duty [f] and created the capital transfer tax, with the following characteristics:
CTT was reduced in scope during the Thatcher years, [80] with the rates applicable to gifts adjusted to encourage business property to be given during a lifetime, and a ten-year accumulation period introduced to cap the effect of graduated rates. [81]
Nigel Lawson, in his 1986 Budget speech, moved to abolish the tax on lifetime gifts altogether, explaining:
My last proposal in this section concerns capital transfer tax which, ever since its introduction by the Labour Government in 1974, has been a thorn in the side of those owning and running family businesses, and as such has had a damaging effect on risk taking and enterprise within a particularly important sector of the economy. In addition to statutory indexation of the threshold and rate bands, I propose this year to reform the tax radically.
In essence, the capital transfer tax is two taxes, as its two separate scales imply: an inheritance tax and a lifetime gifts tax. We have had an inheritance tax in some shape or form ever since Sir William Harcourt introduced his estate duty in 1894. But the lifetime gifts tax which the Labour Government introduced in 1974, in the teeth of united Conservative opposition, is an unwelcome and unwarranted impost. By deterring lifetime giving, it has had the effect of locking in assets, particularly the ownership of family businesses, often to the detriment of the businesses concerned.
Accordingly, I propose to abolish entirely the tax on lifetime gifts to individuals. As with the old estate duty, there will be a tapered charge on gifts made within seven years of death and provisions to charge gifts made with reservation; and the regime for trusts, which is needed as a protection for the death charge, will be kept broadly unchanged.... In recognition of the radically changed nature of the tax, I have decided to rename it the inheritance tax. [82]
This was implemented in the Finance Act 1986.
For IHT purposes, a person's estate includes: [83]
Excluded property comprises: [84]
Relief is also granted, [85] where the value of the estate is reduced with respect to specified business property, agricultural property, woodlands, certain transfers made within three years of death made at a diminished value, and certain other cases.
Deductions will be made from an estate's nil rate band with respect to transfers of value made in excess of specified limits, [86] other than "potentially exempt transfers" made more than seven years before the transferor's death. Transfers of value made within specified limits are known as "exempt transfers". [87]
Transfers of value will also include gifts arising from the amount by which an asset is sold for less than it could have been sold on the open market, as for a sale from a parent to a child. [88] Gifts can also arise where: [89]
Where the value of such transfers exhausts the amount available to the nil rate band, IHT is assessed on the excess amount, to which the recipients of such transfers bear the liability to pay. [86]
Tax is assessed at 40% of the net value of the estate, after application of the nil rate band. [90] The applicable nil rate band will depend on the date of death: if the date falls at any time from 6 August to 5 April in a given tax year, the current year's band will apply; but, where the date is after 5 April but before 6 August, and application for a grant is filed before 6 August, the prior year's band will apply. [91]
For deaths occurring after 5 April 2012, the tax is assessed at 36%, where at least 10% of a specified baseline amount of the estate has been bequeathed as charitable gifts. [92] For purposes of calculation, the property of the estate is separated into three components, each of which is tested to see if the charitable gifts are sufficient to qualify for the lesser rate: [93]
If applicable gifts meet the 10% threshold for a given component, in certain circumstances, upon election, the 36% rate applies to the whole estate. [94] There are several options available for estates to be able to achieve that threshold, such as having the will specifying relevant gifts in terms of percentages of assets, or successors executing a deed of variation to attain the desired result. [95]
In the summer budget of 2015 a new measure was outlined to reduce the burden of IHT for most families by making it easier to pass on the family home to direct descendants without a tax charge. [96] It came into effect upon the passage of the Finance (No. 2) Act 2015, and provided for the following scheduled amounts: [97]
The Finance Act 2016 provided further relief in cases where all or part of the additional band could be lost, where a person had downsized to a less valuable residence or had ceased to own a residence after 8 July 2015 (and before the person has died). This is conditional upon the deceased having left that smaller residence, or assets of equivalent value, to direct descendants. [98] These are defined as lineal descendants, spouses or civil partners of such lineal descendants, or former spouses or civil partners who have not become anyone else's spouse or civil partner. [99]
Effective with the 2005-06 tax year, [100] the Finance Act 2004 introduced a retrospective income tax regime known as pre-owned asset tax (POAT) which covers transactions not made at arm's length, where a person either:
and then subsequently benefits from its use. [101]
The person liable for POAT may, while he is still alive, elect on a timely basis to have such transactions treated as gifts with reservations (thus subject to IHT) with respect to such transactions made in a given tax year. [102] [103]