IHTM42227 - The settlement: variation of discretionary will trusts (S144)

Advice on IHTA84/S144 appointments is given from IHTM35181.

Any distribution within 2 years may qualify under S144, despite the fact that it may not be claimed as such. The IHTA applies as if the will had provided that on the testator’s death the property should be held in the same way it is applied after the event. So if property is appointed to a charity, charity exemption would apply.

Where the testator has died on or after 22 March 2006, the reference to ‘any interest in possession’ applies only to an IIP that is an immediate post-death interest or a disabled person’s interest ( IHTM16060). IHTA/S144 has also been extended, for deaths both before and after 22 March 2006, so that its relieving effect can apply to the creation of an immediate post-death interest or a trust for a bereaved minor under an appointment.

If S144 applies, the absence of a chargeable event will adversely impact any claim for CGT holdover relief. ( IHTM42117)

Refer any S144 queries on cases being worked in PC&S to Primary Compliance Technical Support . They will consider

• whether the trusts are, and have been, non-interest in possession ( IHTM16062) or non-qualifying interest in possession trusts ( IHTM42161), and
• whether the event would otherwise be chargeable under the discretionary trust regime.

First quarter

If the transfer occurs in the first quarter after commencement/death then IHTA84/S65 (4) applies. This provision states that there is no chargeable event for inheritance tax purposes and acts in precedence to S144. The effect is that the original trust is still treated as having been set up, but that the appointment is not chargeable to tax. So if property is appointed to a charity in the first quarter, there is no scope for S144 (2) to operate to enable charity exemption to be given on the death.

See IHTM42117.