Glossary · UK
What is Pre-Owned Asset Tax (POAT)?
An annual income tax charge on the benefit of using an asset you previously owned or funded but gave away, designed to counter inheritance tax avoidance.
Full Definition
Pre-Owned Asset Tax (POAT) is an annual income tax charge introduced from 6 April 2005 to catch arrangements that escape the gift with reservation of benefit rules for inheritance tax. It applies where you continue to enjoy the use of an asset, typically land, chattels or certain intangible property held in trust, that you formerly owned or that you provided the funds to buy, but which is no longer in your estate. The charge is based on the rental or notional benefit you receive and is added to your income for the year. A de minimis applies: if the total benefit across all relevant assets is 5,000 or less in the tax year, no charge arises. POAT does not apply where the asset is already caught by the gift with reservation rules, or where the original disposal was an outright gift to a spouse or civil partner. You can elect, by 31 January after the first year a charge would apply, to have the asset treated as remaining in your estate for IHT instead of paying the annual income tax charge. It mainly affects home loan or reversionary lease schemes and similar IHT planning.