The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The occasions on which a liability to inheritance tax can arise are:
when an individual transfers property into trust during their lifetime
on the death of an individual
when assets are transferred out of a trust
at 10 yearly intervals within a trust
All of these occasions reflect the purpose of IHT as a tax on the transfer of assets.
The lifetime charge applies when a person makes a ‘transfer of value’ or ‘disposition’, as a result of which the value of his estate is less after the disposition than it was beforehand. The definition covers actual gifts of property, as well as notional dispositions. See the Chargeable transfers guidance note.
A transfer of value during a person’s lifetime may not be chargeable because it:
is excluded property. See the Excluded property and situs of assets guidance note
is outside the scope of inheritance tax. See the Dispositions that are not transfers of value guidance note
is an exempt transfer. See the Exempt transfers guidance note
is a potentially exempt transfer. See the Potentially exempt transfers guidance note
is within the nil rate band. See the Nil rate band guidance note
qualifies for BPR or APR at 100%. See the APR and BPR overview guidance notes
As a result of the above exclusions, a lifetime gift into a relevant property trust is the only type of disposition to suffer the lifetime charge to inheritance tax. Such gifts are referred to as chargeable lifetime transfers (CLT). Where tax is payable on lifetime transfers, it is at the rate of 20%. Calculation of the tax on CLTs is described in the Chargeable lifetime transfers guidance note.
Gifts, to individuals, of any type or value are not liable to IHT as they are potentially exempt transfers (PET). They become subject to the additional charge on death if the donor dies within seven
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