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The UK’s Dormant Assets Scheme has been in operation since 2011 and enables banks and building societies to channel funds from dormant bank and building society accounts towards good causes. The Scheme was expanded by the Dormant Assets Act 2022 to include assets in the insurance and pensions, investment and wealth management, and securities sectors.
A dormant asset is a financial product that the customer has not used for many years, and which the provider has been unable to reunite them with, despite efforts based on industry best practice.
Dormant asset funds are transferred to an authorised reclaim fund, Reclaim Fund Ltd (RFL). Customers are able to reclaim from RFL what they would have been owed had their asset never been transferred into the Scheme. In some cases, it will be the monetary value of the dormant asset that will be transferred into RFL, rather than the original asset.
Although the customer is always entitled to have the asset returned to them, in practice they are likely to receive just the monetary value of the asset. This would mean that any favourable IHT treatment that the original asset might have qualified for, such as business relief (IHTM25001) for certain shares, would not be available.
In order that people are not disadvantaged from an IHT perspective, IHTA84/S159A was legislated by Finance (No.2) Act 2023. This ensures that, for inheritance tax (IHT) purposes, where an asset has been transferred to an authorised reclaim fund and its owner was alive at the time but subsequently dies before the asset has been reclaimed, the owner will be treated as still owning the original asset. S159A applies to assets transferred to an authorised reclaim fund on or after 6 June 2022.
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