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Where a person beneficially entitled to an interest in possession in settled property (the life tenant) disposes of his interest for consideration in money or money's worth, the disposal is not a transfer of value but is treated as the coming to an end of his interest¹. Tax is charged (I5.221) as if the value of the property in which the interest subsisted were reduced by the amount of the consideration².

Example

A, who is the life tenant of a fund worth £350,000, assigned his life interest in July 2018 in consideration of a payment to him of £75,000. The assignment is a potentially exempt transfer, which will become chargeable by reason of A's death within seven years. The value transferred is the value of the fund, less the consideration, £350,000 – £75,000 = £275,000.

In determining the amount of consideration the value of a reversionary