Commentary

I7.545 Property leaving maintenance funds

IHT, trusts and estates

I7.545 Property leaving maintenance funds

I7.545 Property leaving maintenance funds

Maintenance funds receive favourable treatment and are not subject to the ten-year periodic charge1 on settlements without an interest in possession2. When the exempt trust status of any part of the fund ends there will be an IHT charge3 unless a specific exemption4 applies.

Exemptions from charge

Tax is not chargeable in the following circumstances:

  1.  

    (a)     when property is applied for the purpose of maintaining etc the heritage property it supports5

  2.  

    (b)     if the property becomes comprised in another exempt maintenance fund within 30 days of leaving the old one. The period is extended to two years where the occasion of the charge is the death of the settlor6. The exemption does not apply, however, if the person who gives the property to the new fund had acquired it for consideration in money or money's worth (the 'purchase' rule)7. There is also an 'excess value' restriction on the exemption where the value of the property in the new fund is lower than its value before the transfer, on similar lines to the restriction illustrated by the Example in I7.5448. Where the property is resettled on the trusts of a new maintenance fund in respect of which HMRC give a direction, no further six year restriction applies to the application of the capital and income from the fund (see I7.542)9. However, if the property comes out of the first fund following the death of the settlor before the six-year period has elapsed, the unexpired portion of that

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