IHTM04285 - Reversionary interests: interest subject to an annuity
In strictness, an interest in property (IHTM04030) subject to a terminable annuity charged on the property is not a future interest and, therefore, not a reversionary interest (IHTM16231) in the property for inheritance tax purposes. The cases of Holliday, Houghton v Adlard [1947] Ch 402 and Attorney General v Lane Fox [1924] 2 KB 498 provide the authority for this view.
In practice, however, you should treat such an interest as a reversionary interest but only to the extent of the slice or proportion of the chargeable property required to produce the annuity. To that extent, therefore, the interest can qualify as excluded property (IHTM04251).