Qualifying interest in possession trusts—IHT treatment
Qualifying interest in possession trusts—IHT treatment

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Qualifying interest in possession trusts—IHT treatment
  • Death of the beneficiary with the qualifying interest in possession
  • Ending of an interest in possession during beneficiary's lifetime
  • Calculation of IHT on lifetime termination of QIIP

FORTHCOMING CHANGE: As originally announced at Autumn Budget 2017 and followed up by written statement after Spring Statement 2018, plus an announcement in Budget 2018, the government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, in July 2019, the Office of Tax Simplification issued its second report on inheritance tax. See also the report published by the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime. See also the research exploring the use of trusts which was also published on 7 November 2018. See News Analysis: Exploring the consultation and review on the taxation of trusts.

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax (IHT) on the following occasions:

  1. on the death of the beneficiary with the interest in possession (the life tenant)

  2. on the death of the beneficiary (life tenant) within seven years after a transfer or lifetime termination of their interest

  3. on the transfer or conversion of the interest to a non-qualifying or discretionary interest

For further information about QIIPs, see Practice Note: The meaning of qualifying interest in