Landed estates and farming families

Strict settlements

A strict settlement is a settlement of land falling under the Settled Land Act 1925 (SLA 1925). At one time, landed estates were almost universally held in strict settlements and some knowledge of strict settlements makes it easier to understand the older title deeds to a landed estate. An understanding of strict settlements can also make it easier to interpret modern settlements of land that have been created by restructuring older strict settlements.

The aim of a strict settlement was generally to ensure so far as possible that a landed estate passed through the senior male line of the family, while also providing for other family members. It was designed to ensure that no one family member could unilaterally bring a settlement to an end and sell the land for their own benefit. The strategy was to use a combination of life estates (or life interests after 1925) and fee tails (or equitable entailed interests after 1925). The advantage of a life interest was that the owner could not enlarge it while the advantage of an entailed interest was that it could continue

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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