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:
- If a child benefits under a settlement after the age of 18 and is not in full-time education;
- If a child takes a permanent job but later resumes full-time education.
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.