IHTM16060 - Interests in possession: introduction
For IHT purposes the most important distinction between the
trusts of settlements is between
- settlements in which there is a qualifying interest in possession ( IHTM16062) and
- settlements in which there is no qualifying interest in possession.
Normally, the interests of the beneficiaries under these two
types of settlements are taxed under different provisions of the
IHTA84.
Following the changes in Finance Act 2006 (
IHTM16061), there can be only three
types of new qualifying interest in possession on or after 22 March
2006 (
IHTM16062). All other new interest in
possession will be non-qualifying and subject to the IHT charges
for “relevant property” (
IHTM42161) unless they meet the
conditions for
These trusts are subject to their own charging regimes under
S71B and S71E-G respectively.
Qualifying interest in possession trusts and non-qualifying
interest in possession or relevant property trusts can exist under
the same settlement at the same time.
The focus of our attention is the rights of the beneficiaries
under the provisions of that settlement.
The meaning of interest in possession and non-interest in
possession was clarified and explained by the House of Lords in
Pearson v IRC.
