Trusts and Inheritance Tax

Occasions of charge

Produced by Tolley
  • 23 Mar 2022 10:48

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Occasions of charge
  • The lifetime charge
  • When does a disposition occur?
  • The charge on death
  • The additional charge
  • The estate charge
  • Commorientes
  • The charge on settled property

Occasions of charge

The occasions on which a liability to inheritance tax can arise are:

  1. when an individual transfers property into trust during their lifetime

  2. on the death of an individual

  3. when assets are transferred out of a trust

  4. 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

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:

  1. is excluded property. See the Excluded property and situs of assets guidance note

  2. is outside the scope of inheritance tax. See the Dispositions that are not transfers of value guidance note

  3. is an exempt transfer. See the Exempt transfers for IHT guidance note

  4. is a potentially exempt transfer. See the Potentially exempt transfers guidance note

  5. is within the nil rate band. See the Nil rate band guidance note

  6. qualifies for BPR or APR at 100%. See the Agricultural property relief (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

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