188体育

The value taxable on an IHTA84/S65 proportionate charge is

• the amount by which the value of relevant property comprised in the trust is less immediately after the event in question than it would be but for the disposition (IHTM04097)
• grossed up where the tax is not being paid out of the assets ceasing to be relevant property.

The 鈥榣oss鈥� basis is a reflection of the 鈥榣oss to transferor鈥� principle in lifetime transfers. This has led to the S65(2)(a) basis being described as a 鈥榣oss to settlement鈥� or 鈥榣oss to trust鈥�. That description is correct where the whole fund is held on discretionary trusts of relevant property, but you must be careful not to include any non-relevant or related funds.聽

Example

A settlement holds 100 shares (100% control) in the Acme Investment Company Ltd. The trusts are two-thirds qualifying interest in possession, and one-third discretionary.聽聽聽

The only relevant property in the settlement is the one-third share held on discretionary trusts. On distribution of the one-third discretionary share, the loss to the relevant property is only a 33.33% shareholding valued in isolation.聽

Do not include non-relevant property in the 鈥榖efore鈥� and 鈥榓fter鈥� considerations. If the loss to settlement basis is used incorrectly, the absolute control holding of 100% would be valued 鈥榖efore鈥�, and a 66.66% shareholding valued 鈥榓fter鈥� to quantify the loss. That valuation would produce a higher chargeable value, but part of the loss is attributable to non-relevant property and is not correct.聽