SolvedIHTM17100 | Pensions: other provisions: introduction
From HM Revenue & Customs · Inheritance Tax Manual
In general, the Inheritance Tax principles that apply to pension schemes currently also applied where the date of death was before 6 April 2006 or between 6 April 2006 and 5 April 2011. But there have also been some significant changes.
The Income Tax legislation relating to pension schemes changed significantly on 6 April 2006 when a single set of rules was introduced to replace the previous eight regimes. There have been further legislative changes in the following years. For Inheritance Tax there were some specific provisions (in addition to the general principles) in place for deaths occurring in the period between 6 April 2006 and 5 April 2011 inclusive. These are covered in detail at IHTM17300 onwards.
The following guidance relates to provisions that were in existence before 6 April 2006 and may still have some relevance currently, but you will need to be careful and make sure you apply the provisions that apply at the relevant date of death.
The main situation where you may need to consider the position as it existed before 6 April 2006 relates to an omission to exercise a right.
Where a scheme member does not take the benefits to which they are entitled, either wholly or partly, and has still not done so before they die (so that death benefits become payable) the omission to take the retirement benefits may be treated as a lifetime transfer under IHTA84/S3(3). In February 1992, after discussion with the Association of British insurers (ABI), a Tax Bulletin was issued that clarified the circumstances where a charge would be considered (IHTM17101).
Subsequent legislation in IHTA84/S12(2A-G) introduced relieving provisions that covered most of the situations where IHTA84/S3(3) applied. From 6 April 2011, IHTA84/S12(2ZA) disapplied IHTA84/S3(3) in relation to:
Following the changes brought about by the Taxation of Pensions Act 2014, which provided additional ways in which registered money purchase pensions could be accessed, IHTA84/S12A was introduced to ensure that IHTA84/S3(3) was disapplied to such drawdown arrangements.
There are still a few situations, for employer-financed retirement benefit schemes for example, where the Tax Bulletin comments are relevant.
The IHTA84/S3(1) charge, for example on assigning death benefits to a trust, was not, and is not, affected by the Tax Bulletin comments.