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I5.251 Absolute entitlement by the life tenant

There is no IHT charge on the termination of an interest in possession where the person who had that interest (the life tenant) becomes beneficially entitled to the property in which it subsisted¹. This does not apply where a close company has an interest in possession, which is treated as belonging to the participators², and it becomes entitled to the capital. HMRC has, however, stated that they will apply s 53(2) where the company becomes entitled to or disposes of the interest³.

The reason for this exclusion from charge is that a person having a QIIP (often called the 'life tenant') is already treated for most purposes as if he were beneficially entitled to the property in which the interest subsists. There could be a tax charge, however, where the life tenant becomes entitled to the settled property by purchasing the reversion on his interest. In this case the reversion will not form part of his estate⁴,