The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Under the inheritance tax rules, a settlor makes a disposition of his property where he transfers ownership of it to another person. In addition, a disposition is also made where it is effected by associated operations.
So where associated operations result in a transfer of the beneficial ownership of property by the settlor and a fall in the value of his estate, he is treated as having made a disposition resulting in a transfer. That transfer is either a chargeable lifetime transfer (CLT) subject to the lifetime charge to IHT or a potentially exempt transfer (PET).
The rules on associated operations exist in order to prevent the avoidance of IHT by the means of splitting a single transfer into a series of transactions in order to reduce the amount of IHT due. The rules will only apply in cases which would not be regarded as a disposition of property in its ordinary sense.
For example in Rysaffe Trustee Co, a settlor made five discretionary trusts and transferred shares to each trust. HMRC argued that the creation of all the trusts constituted associated operations. Thus the settlor had to be regarded as having transferred all the shares at once for the purposes
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