The rules for calculating the rate of tax on both the ten-yearly charge and the proportionate charge are modified for trusts that were set up before 27 March 1974.
The calculation of the ten-yearly charge does not include
The rule about additions to settlements does apply (s.67(4)).
If you have to calculate the proportionate charge arising before the first ten-year anniversary of the trust, contact Inheritance Tax for advice.
Property held on discretionary trusts may originally have been held on trusts under which the settlor or the settlor's spouse, civil partner, widow, widower or surviving civil partner had an interest in possession.
If the property was settled after 26 March 1974, the rules governing the tax treatment of discretionary trusts apply as though the property was not in the original trust. Instead it is treated as a separate trust made by the spouse or civil partner who was last entitled to an interest in possession in it, at the time when that interest came to an end. The trust has the same ten-year anniversary dates as the original trust. This rule is relevant for deciding the rate of the ten-yearly and the proportionate charge.
For example, the calculation of the rate of tax would, in this situation, take account of the cumulative total of chargeable transfers made by the spouse or civil partner who had the last interest in possession for the seven years before that interest came to an end. This contrasts with the normal rule on calculating the rate of tax (see Examples 1 and 3), which take account of the cumulative total of the person who had made the trust in the first place.
If this happens after 9 December 1981, the property is treated as remaining in the first trust. But this treatment does not apply
Similar treatment, applies to property that moved between settlements before 10 December 1981 and after 26 March 1974.
