IHTM04099 - Settled property: charges on accumulation and maintenance trusts

Property ( IHTM04030) held on discretionary trusts which come within the inheritance tax definition of an accumulation and maintenance settlement is not relevant property and therefore exempt from the ten-yearly and proportionate charges.

Tax is charged

• where property held on accumulation and maintenance trusts ceases to be held on those trusts, IHTA84/S71 (3)(a) or
• when the trustees make a disposition ( IHTM04023) which reduces the value of such property, IHTA84/S71 (3)(b).

The charge is on the amount by which the value of the settled property is reduced as a result of the event giving rise to the charge, IHTA84/S70 (5). Grossing up is required if the trustees pay the tax out of property remaining in the settlement. Under IHTA84/S70 (4) relief for dispositions not intended to confer bounty ( IHTM04161) and a grant of a tenancy of agricultural property ( IHTM04230) can apply.

There is no charge where settled property ceases to be held on accumulation and maintenance trusts

• because a qualifying beneficiary becomes entitled to the property or to an interest in possession in it, IHTA84/S71 (4)(a) or
• because a qualifying beneficiary dies before becoming entitled, IHTA84/S71 (4)(b).

Distributions to charities or other exempt bodies are not liable to the charge.