IHTM42089 - Ten year anniversary: relief for double charges

If property has鈥��听

  • been subject to a proportionate charge within the ten years preceding the鈥�ten year鈥痑nniversary鈥�(TYA), and鈥��听

  • later becomes relevant property, and鈥�听

  • is now subject to the IHTA84/S64 charge at the TYA,鈥��听

apply IHTA84/S67 (6) relief against the TYA claim for the potential double charge.鈥赌�听

These cases are听rare, but听may occur where a settlor ceases to be long-term UK resident (IHTM47000) and becomes long-term UK resident again before the ten-year anniversary.听

Without a relief the value of the proportionate charge鈥�听

  • would be cumulated at the TYA under IHTA84/S66 (5)(b), and鈥�听

  • it would be reflected in the taxable TYA fund.鈥�听

Applying the relief鈥�听

Apply the relief by reducing the trust鈥檚 cumulative total at the TYA by whichever is the lower value of鈥�听

  • The value on which tax was charged for the proportionate charge (or the proportion of it falling back in), or鈥�听

  • the value of the property (or proportion) as reflected in the TYA fund.鈥�听

Note that the reduction is to the trust鈥檚 cumulative total, not to the taxable TYA fund itself. The relief can apply to more than one event.鈥�听

Example听

  • A non-interest in possession settlement dated鈥�17 November鈥�1991鈥痟ad its first TYA on 17 November鈥�2001. The settlor had made no chargeable transfers in the 7 years before the trust commenced.A听life interest in a quarter of the fund was appointed to Mary on 15 May鈥�2005. Value of the transfer for the proportionate charge was then 拢300,000.鈥赌�听

  • Mary dies on 28 October鈥�2008鈥痑nd the transferred assets fall back into relevant property.鈥�听

  • At the TYA on 17 November 2011 the value of the proportionate charge portion听as existing in the whole fund can be identified as 拢200,000.听The settlement鈥檚 cumulative total (which would otherwise be 拢300,000) will therefore be reduced by 拢200,000 to 拢100,000 under IHTA84/S67 (6).If there existed other proportionate charges unaffected by IHTA84/S67 (6) which caused the nil-rate band to be exceeded, the reduction by -拢200,000 would make no difference to the calculation of rate 鈥� the TYA would still be taxed on a maximum 6%.鈥�听

Example听

  • Manhar, a long-term UK resident,听makes a trust with foreign assets听in Year One.听听听

  • Whilst he is a long-term UK resident, the听assets are relevant property.听

  • Manhar ceases to be a long-term UK resident in Year Three and pays a proportionate charge听on the value of the trust fund, which is 拢600,000.听听听

  • Manhar returns to the UK and becomes long-term UK resident again in Year 7.听听听

  • At the TYA听in Year 10, the settlement鈥檚 cumulative total听(ordinarily 拢600,000, giving听a full rate of 6%听at the TYA) will be reduced. 听At the TYA, the fund is worth 拢540,000. The settlement鈥檚 cumulative total will therefore be reduced under IHTA84/S67 (6) by 拢540,000 (to 拢60,000,听giving a rate lower than 6%).听

Interaction with IHTA82/S66 (2) relief听

In the typical case where S67(6) applies, the property in question has once again become relevant property comprised听in the settlement. As it has not been relevant property throughout the period of ten years preceding the TYA, then relief under S66(2) will be due.鈥�(IHTM42088)听
听
This is not a duplicate relief听

  • S67(6) operates听on the cumulative value only,听

  • S66(2) operates听on the rate of tax upon relevant property听