Section 146 IHTA 1984: Inheritance Act 1975 Court Orders and Inheritance Tax — How Court-Ordered Provision Affects the IHT Position
Where a court makes provision from an estate under the Inheritance Act 1975, section 146 IHTA 1984 treats that provision as if the deceased had included it in their will. If the court orders provision for a surviving spouse, the spousal exemption applies — potentially unlocking a full IHT refund from HMRC. This is a powerful but underused post-death IHT planning tool, particularly for surviving spouses, cohabiting partners, and blended families.
How Section 146 IHTA 1984 Works
Section 146 IHTA 1984: the deeming provision
Section 146(1) IHTA 1984 provides that where an order is made under the Inheritance (Provision for Family and Dependants) Act 1975 (IPFDA 1975), the IHT position is adjusted as if the disposition of the deceased's estate had effect subject to the provision of the court order. In plain terms: the court order is treated as if the deceased had included the ordered provision in their will. If the court orders that £200,000 from the estate is paid to the surviving cohabiting partner, the IHT is recalculated as if the deceased had left £200,000 to the partner in their will. The IHT on the redirected provision depends on the nature of the recipient: if to a spouse, the spousal exemption applies; if to a qualifying charity, the s23 exemption applies; if to an individual who does not attract an exemption, the provision is a chargeable transfer.
Who can make a claim under IPFDA 1975?
The following persons can apply to the court for provision under IPFDA 1975: (1) spouse or civil partner; (2) former spouse or civil partner who has not remarried; (3) cohabiting partner (lived with the deceased for at least 2 years before death as husband, wife, or civil partner); (4) child of the deceased (including adult children and step-children — but step-children must have been treated as children of the family); (5) any person (not a spouse) who was maintained by the deceased. The applicant must apply to court within 6 months of the grant of probate or letters of administration (or with court permission if later). Claims are made in the Family Division of the High Court or county court.
IHT improvement from a s146 court order to a surviving spouse
The most significant IHT benefit of a s146 order arises where the court orders provision to a surviving spouse who received nothing (or insufficient provision) under the will or intestacy. Example: the deceased left the entire estate to adult children from a previous marriage (no provision for the current spouse). IHT on the estate above the NRB was paid at 40%. The surviving spouse applies under IPFDA 1975 and the court orders a life interest in the matrimonial home to the surviving spouse. Under s146 IHTA 1984, the provision for the spouse is treated as if the deceased had made it — the home passes to the spouse subject to the life interest. The spousal exemption now applies to the life interest value. An IHT refund may be available from HMRC.
How to reclaim IHT after a court order: section 146(2)
Where IHT was paid on the estate before the court order was made (as is typical — IHT must be paid before probate is granted), and the court order reduces the chargeable estate (e.g. by directing assets to an exempt beneficiary), the executors can claim a refund of the overpaid IHT from HMRC. Under s146(2) IHTA 1984, any consequential adjustment to the IHT payable is made by HMRC. The claim for repayment must be made to HMRC within 4 years of the end of the accounting period in which the IHT was paid (or such longer period as HMRC allows in special circumstances). The claim is submitted with a copy of the court order and the recalculated IHT position. HMRC processes refunds on receipt of the claim with supporting documentation.
Interaction with deed of variation: avoiding double adjustment
A s146 court order under IPFDA 1975 and a deed of variation under s142 IHTA 1984 can both be used to redirect estate assets and improve the IHT position — but they cannot both apply to the same assets. Where beneficiaries and the claimant reach a settlement agreement (without a court order) to provide financial provision outside the formal IPFDA process, the settlement may be effected as a deed of variation by the relevant beneficiaries redirecting their shares. If a formal court order is made, s146 applies (not s142). In practice, most IPFDA claims settle by agreement — the parties negotiate and the settlement is documented as a deed of variation by the beneficiaries. A formal court order is only needed where agreement cannot be reached.
Using s146 with charitable provision
A court order under IPFDA 1975 can direct provision to a qualifying charity (e.g. where the deceased had a long-standing connection to a charity and it applies for provision — charities cannot apply under IPFDA 1975, but the court can approve a consent order that includes charitable provision if all parties agree). More commonly: where the estate's IHT position would benefit from a charitable legacy (to trigger the 10% rule under Schedule 1A), and the will did not include one, the beneficiaries can agree to a settlement that includes a charitable gift (effected as a deed of variation rather than a court order). The deed of variation is treated as a s142 variation, not a s146 order — but the effect on the IHT is the same.
Frequently Asked Questions
Can a cohabiting partner reduce IHT by making an Inheritance Act claim?
Yes — where a court makes provision for a cohabiting partner under IPFDA 1975, s146 IHTA 1984 treats the provision as if made by the deceased. However, unlike the unlimited spousal exemption, provision to a cohabiting partner (as an unmarried individual) is not automatically IHT-exempt. The provision is treated as a legacy to the partner — which is a chargeable transfer (taxable above the NRB) if the partner is not a spouse. The benefit for the partner is that they receive financial provision; the IHT on the estate may not be reduced (unless the court order redirects from a chargeable beneficiary to an exempt one). The main IHT improvement from an Inheritance Act claim arises specifically where the provision is ordered for a surviving spouse or civil partner.
What if IHT was already paid before the court order? Can we get it back?
Yes — under s146(2) IHTA 1984, where a court order reduces the chargeable estate (e.g. by directing assets to a surviving spouse), a refund of overpaid IHT can be claimed from HMRC. The claim is made to HMRC with a copy of the court order and the revised IHT calculation. The refund claim must be made within 4 years of the end of the accounting period in which IHT was paid. HMRC processes refunds in the normal way. If the court order increases the chargeable estate (e.g. by directing assets away from the spouse and to chargeable beneficiaries), additional IHT may be payable.
Does a settlement agreement in an Inheritance Act claim qualify under s146?
No — s146 applies specifically to court orders made under IPFDA 1975, not to out-of-court settlements. Most IPFDA claims settle by negotiation — the parties agree a financial settlement without the court making an order. In those cases, the settlement is typically documented as a deed of variation under s142 IHTA 1984 — the beneficiaries who received assets under the will redirect part of their entitlement to the claimant. The deed of variation qualifies under s142 if it meets the conditions (in writing, signed by all affected beneficiaries, within 2 years of death, containing the IHT election statement). The tax effect is the same as a s146 order for qualifying variations, but the legal route is different.
Is there a time limit for an Inheritance Act claim to benefit from the s146 IHT adjustment?
The IPFDA 1975 time limit for making an application to court is 6 months from the date of the grant of probate (or letters of administration). The court has discretion to allow late applications. For the IHT refund under s146(2): the IHT repayment claim must be made to HMRC within 4 years of the end of the accounting period in which the tax was paid. These are separate time limits. A court order made within 6 months of probate, combined with an HMRC repayment claim within 4 years, is the standard sequence. Orders made with court permission after 6 months (late claims) can still trigger s146 and an HMRC refund within the 4-year window.
How should executors respond to an Inheritance Act claim from an IHT perspective?
Executors should take specialist legal advice when an IPFDA 1975 claim is received. From an IHT perspective: (1) the IHT already paid is based on the will as written or the intestacy distribution; (2) if the claim ultimately results in a court order or agreed deed of variation, s146 or s142 IHTA 1984 may entitle the estate to an IHT refund; (3) executors should not distribute the estate while an IPFDA claim is pending — if they do and the court later makes an order, recovering assets from beneficiaries can be difficult. The 6-month window post-probate is when executors are most at risk of distributing prematurely. Executors have a duty to ensure adequate assets remain in the estate to meet any successful IPFDA claim.
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