For IHT purposes the most important distinction between the trusts of settlements is between
Normally, the interests of the beneficiaries under these two
types of settlements are taxed under different provisions of the
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.