IHTM35151 | IHT implications of an Instrument of Variation: effect of coming within s.142
From HM Revenue & Customs · Inheritance Tax Manual
When a variation satisfies the requirements of and there is a valid election or, on or after 1 August 2002, a valid statement of intent
the variation is not a transfer of value, and
the applies as if the deceased had effected the variation
Consequently, for example
if the extent to which the death estate is exempt is increased () or decreased, you may need to adjust the tax () on the whole of the death estate, including property taxable at a separate title, such as settled property in which the deceased had a life interest,
if a variation sets up a non-interest in possession trust, the deceased is treated as the settlor, and
the gift with reservation rules in cannot apply to a disposition which is accepted as a variation within . This is because the effect of is that the deceased is treated as the donor.