The meaning of relevant property
Produced in partnership with Paul Davies of Clarke Willmott
The meaning of relevant property

The following Private Client practice note produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • The meaning of relevant property
  • How to recognise relevant property
  • Trust property excepted from the relevant property regime
  • Date of commencement of settlements
  • Ten-year anniversary
  • Related settlements

The term 'relevant property' defines a category of trust property which is subject to a special regime for inheritance tax (IHT). As described in Practice Note: Introductory guide to the taxation of trusts, the IHT treatment of trust property falls into two broad categories:

  1. beneficial entitlement

  2. relevant property

In the 'beneficial entitlement' category, trust property is subject to IHT as if it belonged outright to the beneficiary. It is deemed to be theirs and is treated as part of their estate. Typically, this treatment applies where the beneficiary has a qualifying interest in possession (QIIP), or where they have an absolute entitlement to the trust property. See Practice Notes: Qualifying interest in possession trusts—IHT treatment and Bare trusts—IHT.

By contrast, relevant property has an independent tax life. Once it is effectively removed from the settlor's estate, it is not taxed as though it were part of any other individual's estate. To compensate for this, a special regime applies. Relevant property may be subject to IHT on the following occasions:

  1. when it becomes relevant property. This is usually when a trust is created or augmented, but it could be when the status of assets within a trust changes—see Practice Note: Relevant property trusts—chargeable lifetime transfers

  2. at ten-year intervals within a trust—see Practice Note: Relevant property trusts—the principal (ten-year) charge, and

  3. when it leaves the trust—see Practice Note:

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