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A reversionary interest is not excluded property if it is one to which either the settlor, his spouse or civil partner is or has been beneficially entitled¹

The main reason for this provision is to prevent tax avoidance by a settlor settling property for a very short period, with reversion to himself, and then giving away the reversion.

The initial settlement will give rise to a small transfer of value because the value of the reversion he retains is taken into account in determining the extent of the loss to his estate. If the reversion were then excluded property he could give it away, and cease to have any interest in the settled property, without any possibility of IHT charge.

The same transaction, but with the reversion being created in favour of the settlor's spouse or civil partner would have much the same consequences by virtue of the spouse or civil partner exemption if the reversion were excluded property in the hands of the settlor's spouse or civil partner.