Commentary

I7.531 Settled property generally

IHT, trusts and estates

I7.531 Settled property generally

Conditional exemption—settled property

I7.531 Settled property generally

Interest in possession settlements

The position of a life tenant or annuitant is the same, for the purposes of conditional exemption, as that of an individual absolutely entitled to heritage property. All the rules as set out in I7.501–I7.515 can be read as applying to settled property in which there is an interest in possession.

Settlements with no interest in possession

The general provisions relating to conditionally exempt transfers do apply to property held on trusts with no interest in possession, and the rules set out in I7.501–I7.515 can be read as applying universally, but subject to the comments below.

Conditional exemption from exit charges

Conditional exemption from an exit charge arises where:

  1.  

    •     the property in question has been comprised in the settlement throughout the six years ending with the event which would otherwise have given rise to the charge

  2.  

    •     the property is designated by the Board on a claim being made for the purpose1, and

  3.  

    •     the required undertaking is given by the appropriate person2

Such an event, which does not affect the trust's cumulative total of gifts, is called a conditionally exempt occasion. It makes no difference whether the exemption was granted under the present or the old exemption regimes or under the present or the old discretionary trust rules3.

Designation and undertakings after 30 July 1998

The new rules relating to conditional exemption enacted in FA 1998 apply to non-interest in possession settled property, largely as a consequence of IHTA 1984,

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