IHTM04284 | Reversionary interests: lease for life

Under general law a lease of property (IHTM04030) does not by itself amount to a settlement (IHTM16042) of that property. Accordingly, an interest expectanton the determination of a lease is normally not a reversionary interest (IHTM16231) for Inheritance Tax (IHT) purposes even though it may sometimes be described as a ‘freehold reversion’ or ‘reversionary lease’.

However, certain types of leases, for example, a lease for someone’s life, (IHTM23189) or a lease determinable on or by reference to someone’s death, are in certain circumstances treated as settlements for IHT purposes, IHTA84/S43 (3). An interest expectant on the determination of a lease which is treated as a settlement is therefore a reversionary interest for those purposes.

But although the lease is treated as a settlement, the reversionary interest is not excluded property (IHTM04251), IHTA84/S48 (1)(c). This does not prevent it from being outside the tax charge for some other reason, for example, under IHTA84/S6 (1).