Section 11 of Inheritance Tax Act 1984 (IHTA 1984) states that a disposition, or gift, will not be a transfer of value if it is made by a parent in favour of their child for their maintenance, education or training, for a period ending no later than the year in which they attain the age of eighteen or, after reaching 18, cease to undergo full-time education or training.
This therefore poses a question as to whether a child leaving college, or one completing their undergraduate degree to undertake volunteer work abroad before returning to pursue further education, would meet the criteria set out under section 11 IHTA 1984.
No case law or specific guidance is provided on this and, therefore, the position is uncertain.
HMRC does however provide that a temporary gap in full-time education (i.e. vacation jobs or service with Voluntary Service Overseas between school and university) should be ‘disregarded’. It continues to add that if the child does not return to full-time education, the transfers that took place when they left school should be considered as transfers of value.
HMRC does give examples as to when section 11 IHTA 1984 would not apply, namely:
It is important to note that section 11 IHTA 1984 does not include transfers for children other than your own (i.e. your spouse/partner’s children) that have been born outside of marriage.
Vardags Limited is a limited company trading as Vardags, Company No 7199468, registered in England and Wales, having its registered office at 10 Old Bailey, London EC4M 7NG. Vardags is authorised and regulated by the Solicitors Regulation Authority (SRA Number 535955). Its VAT number is 99 001 7230.
Vardags uses the term ‘Partner’ as a professional title only, to describe a Senior Solicitor, Employee or Consultant with relevant experience, expertise and qualifications (whether legally qualified or otherwise) to merit the title. Our Partners are not partners in the legal sense. They are not liable for the debts, liabilities or obligations of Vardags Limited. Similarly, the term ’Director’ is a professional title only, to describe a non-legally qualified employee or consultant of Vardags with relevant experience, expertise and qualifications to merit the title. It does not necessarily imply that the relevant individual is a director of Vardags Limited.
A list of the directors of Vardags Limited and a list of the names of those using the title of ’Director’ and ’Partner’ together with their official status is available for inspection at Vardags’ registered office.