IHTM04096 - Settled property: charges on property held in discretionary trusts

There are two types of charges on property held in discretionary trusts - called relevant property. (IHTM04095)

There is a charge every ten years (the ten yearly charge), IHTA84/S64. The first is on the tenth anniversary of the making of the settlement.

The other charge is the proportionate charge, IHTA84/S65 which applies

  • when the property ceases to be relevant property, IHTA84/S65 (1)(a) or
  • when the trustees make a disposition (IHTM04023) which reduces the value of the relevant property, IHTA84/ IHTM04030) S65 (1)(b).

The main examples of property (ceasing to be relevant property are when

  • the settlement (IHTM16000) comes to an end
  • some of the property is distributed to beneficiaries
  • an individual becomes beneficially entitled to an interest in possession (IHTM16000) in the settled property
  • the property is appointed on special trusts, for example, accumulation and maintenance trusts, (IHTM16000) and
  • when the property becomes excluded property, (IHTM04251) although no charge arises on property becoming excluded property under IHTA84/S48 (3) or IHTA84/S65 (7).

There are various circumstances in which the charge under IHTA84/S.65 does not apply

  • when the event which would otherwise give rise to the charge occurs within three months of the settlement commencing or of a ten-year charge arising, IHTA84/S65 (4), and
  • where the property ceasing to be relevant property becomes
    • the property of a qualifying charity or other exempt body, IHTA84/S76
    • held on certain specified trusts for employees, IHTA84/S75, where the property concerned is shares or securities in the company, or
    • held on trusts of an approved fund for the maintenance of heritage property, IHTA84/SCH4/PARA16 onwards.