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Inheritance Tax Act 1984

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Inheritance Tax Act 1984

1984 CHAPTER 51

An Act to consolidate provisions of Part III of the Finance Act 1975 and other enactments relating to[F1 inheritance tax].

[31st July 1984]X1X2

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Editorial Information

X1A Table showing the derivation of the provisions of this consolidation Act will be found at the end of the Act. The Table has no official status.

X2This Act is based on material edited by the Inland Revenue and the style of editing for effects prior to 1.2.1991 differs from most Acts on the Statute Law Database.

Amendments (Textual)

F1 By Finance Act 1986 s. 100(1),on and after 25July 1986the Capital Transfer Tax Act 1984may be cited as the Inheritance Tax Act 1984.

Modifications etc. (not altering text)

C1Act: for the words "Supreme Court Act 1981" wherever they occur there is substituted (prosp.) the words "Senior Courts Act 1981" by virtue of Constitutional Reform Act 2005 (c. 4), ss. 59, 148(1), Sch. 11 para. 1(2) [Editorial Note: this amendment will be carried through into the text of the Act at the same time as any other effects on the Act for the year in which the relevant commencement order (or first such order) is made]

C2Act modified (1.11.2004 with effect as mentioned in reg. 1 of the amending S.I.) by The Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004 (S.I. 2004/2543), reg. 7(2)

C3Act modified (with effect in accordance with s. 195(12) of the amending Act) by Finance Act 2003 (c. 14), s. 195

C4 By Finance Act 1986 s. 100(1),on and after 25July 1986the Capital Transfer Tax Act 1984may be cited as the Inheritance Tax Act 1984.

C5Act amended (1.5.1995 with effect in relation to transfers of value or other events occuring on or after 6.4.1995) by 1995 c. 4, s. 154(2)(3)(5)

Act modified (31.7.1998 with effect as mentioned in s. 161 of the amending Act) by 1998 c. 36, s. 161(2)(c)

Commencement Information

I1Act wholly in force at 1.1.1985 see s. 274(1).

PART IE+W+S+N.I. GENERAL

Main charges and definitionsE+W+S+N.I.

1 Charge on transfers.E+W+S+N.I.

[F2Inheritance tax] shall be charged on the value transferred by a chargeable transfer.

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Amendments (Textual)

F2 See Finance Act 1986 s. 100(1)and (2)—for any liability to tax arising on and after 25July 1986any reference in the legislation to capital transfer tax has effect as a reference to inheritance tax.

2 Chargeable transfers and exempt transfers.E+W+S+N.I.

(1)A chargeable transfer is a transfer of value which is made by an individual but is not (by virtue of Part II of this Act or any other enactment) an exempt transfer.

(2)A transfer of value made by an individual and exempt only to a limited extent—

(a)is, if all the value transferred by it is within the limit, an exempt transfer, and

(b)is, if that value is partly within and partly outside the limit, a chargeable transfer of so much of that value as is outside the limit as well as an exempt transfer of so much of that value as is within the limit.

(3)Except where the context otherwise requires, references in this Act to chargeable transfers, to their making or to the values transferred by them shall be construed as including references to occasions on which tax is chargeable under Chapter III of Part III of this Act (apart from section 79), to their occurrence or to the amounts on which tax is then chargeable.

3 Transfers of value.E+W+S+N.I.

(1)Subject to the following provisions of this Part of this Act, a transfer of value is a disposition made by a person (the transferor) as a result of which the value of his estate immediately after the disposition is less than it would be but for the disposition; and the amount by which it is less is the value transferred by the transfer.

(2)For the purposes of subsection (1) above no account shall be taken of the value of excluded property which ceases to form part of a person’s estate as a result of a disposition.

(3)[F3 Where the value of a person's estate is diminished, and the value—

(a)of another person's estate, or

(b)of any settled property, other than settled property treated by section 49(1) below as property to which a person is beneficially entitled,

is increased] by the first-mentioned person’s omission to exercise a right, he shall be treated for the purposes of this section as having made a disposition at the time (or latest time) when he could have exercised the right, unless it is shown that the omission was not deliberate.

(4)Except as otherwise provided, references in this Act to a transfer of value made, or made by any person, include references to events on the happening of which tax is chargeable as if a transfer of value had been made, or, as the case may be, had been made by that person; and “transferor” shall be construed accordingly.

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Amendments (Textual)

F3Words in s. 3(3) substituted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 7, 8

[F43A Potentially exempt transfers.E+W+S+N.I.

(1)Any reference in this Act to a potentially exempt transfer is a reference to a transfer of value—

(a)which is made by an individual on or after 18th March 1986 [F5but before 22nd March 2006] ; and

(b)which, apart from this section, would be a chargeable transfer (or to the extent to which, apart from this section, it would be such a transfer); and

(c)to the extent that it constitutes either a gift to another individual or a gift into an accumulation and maintenance trust or a disabled trust;

F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7(1A)Any reference in this Act to a potentially exempt transfer is also a reference to a transfer of value—

(a)which is made by an individual on or after 22nd March 2006,

(b)which, apart from this section, would be a chargeable transfer (or to the extent to which, apart from this section, it would be such a transfer), and

(c)to the extent that it constitutes—

(i)a gift to another individual,

(ii)a gift into a disabled trust, or

(iii)a gift into a bereaved minor's trust on the coming to an end of an immediate post-death interest.

(1B)Subsections (1) and (1A) above have effect subject to any provision of this Act which provides that a disposition (or transfer of value) of a particular description is not a potentially exempt transfer.]

(2)Subject to subsection (6) below, a transfer of value falls within subsection (1)(c) [F8 or (1A)(c)(i)] above, as a gift to another individual,—

(a)to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes comprised in the estate of that other individual, . . . F9, or

(b)so far as that value is not attributable to property which becomes comprised in the estate of another person, to the extent that, by virtue of the transfer, the estate of that other individual is increased, . . . F10

(3)Subject to subsection (6) below, a transfer of value falls within subsection (1)(c) above, as a gift into an accumulation and maintenance trust or a disabled trust, to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes settled property to which section 71 or 89 of this Act applies.

[F11(3A)Subject to subsection (6) below, a transfer of value falls within subsection (1A)(c)(ii) above to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes settled property to which section 89 below applies.

(3B)A transfer of value falls within subsection (1A)(c)(iii) above to the extent that the value transferred is attributable to settled property (whenever settled) that becomes property to which section 71A below applies in the following circumstances—

(a)under the settlement, a person (“L”) is beneficially entitled to an interest in possession in the settled property,

(b)the interest in possession is an immediate post-death interest,

(c)on or after 22nd March 2006, but during L's life, the interest in possession comes to an end,

(d)L is beneficially entitled to the interest in possession immediately before it comes to an end, and

(e)on the interest in possession coming to an end, the property—

(i)continues to be held on the trusts of the settlement, and

(ii)becomes property to which section 71A below applies.]

(4)A potentially exempt transfer which is made seven years or more before the death of the transferor is an exempt transfer and any other potentially exempt transfer is a chargeable transfer.

(5)During the period beginning on the date of a potentially exempt transfer and ending immediately before—

(a)the seventh anniversary of that date, or

(b)if it is earlier, the death of the transferor,

it shall be assumed for the purposes of this Act that the transfer will prove to be an exempt transfer.

(6)Where, under any provision of this Act [F12other than section 52] tax is in any circumstances to be charged as if a transfer of value had been made, that transfer shall be taken to be a transfer which is not a potentially exempt transfer.]

[F13(7)In the application of this section to an event on the happening of which tax is chargeable under section 52 below, the reference in subsection (1)(a) [F14or (1A)(a)] above to the individual by whom the transfer of value is made is a reference to the person who, by virtue of section 3(4) above, is treated as the transferor.]

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Amendments (Textual)

F4Finance Act 1986 Sch. 19 para. 1,in relation to transfers of value made on or after 18March 1986.

F6Words in s. 3A(1) repealed (22.3.2006) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 6 Note 1}

F8Words in s. 3A(2) inserted (22.3.2006) by Finance Act 2006, s. 156, Sch. 20 paras. 7, {9(4)}

F9 Repealed by Finance Act 1987 (No. 2) s. 96(2)(a)and Sch. 9 Part III,with effect from 17March 1987.

F10 Repealed by Finance Act 1987 (No. 2) s. 96(2)(b)and Sch. 9 Part IIIwith effect from 17March 1987.

F12Finance Act 1987 (No. 2) s. 96(2)(c),in relation to transfers of value made on or after 17March 1987.

F13Finance Act 1987 (No. 2) s. 96(1), (3),in relation to transfers of value made on or after 17March 1987.

4 Transfers on death.E+W+S+N.I.

(1)On the death of any person tax shall be charged as if, immediately before his death, he had made a transfer of value and the value transferred by it had been equal to the value of his estate immediately before his death.

(2)For the purposes of this section, where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.

5 Meaning of estate.E+W+S+N.I.

(1)For the purposes of this Act a person’s estate is the aggregate of all the property to which he is beneficially entitled, [F15 except that—

(a)the estate of a person—

(i)does not include an interest in possession in settled property to which section 71A or 71D below applies, and

(ii)does not include an interest in possession that falls within subsection (1A) below, and

(b)the] estate of a person immediately before his death does not include excluded property.

[F16(1A)An interest in possession falls within this subsection if—

(a)it is an interest in possession in settled property,

(b)the settled property is not property to which section 71A or 71D below applies,

(c)the person is beneficially entitled to the interest in possession,

(d)the person became beneficially entitled to the interest in possession on or after 22nd March 2006, and

(e)the interest in possession is—

(i)not an immediate post-death interest,

(ii)not a disabled person's interest, and

(iii)not a transitional serial interest.]

(2)A person who has a general power which enables him, or would if he were sui juris enable him, to dispose of any property other than settled property, or to charge money on any property other than settled property, shall be treated as beneficially entitled to the property or money; and for this purpose “general power” means a power or authority enabling the person by whom it is exercisable to appoint or dispose of property as he thinks fit.

(3)In determining the value of a person’s estate at any time his liabilities at that time shall be taken into account, except as otherwise provided by this Act.

(4)The liabilities to be taken into account in determining the value of a transferor’s estate immediately after a transfer of value include his liability for [F17inheritance tax] on the value transferred but not his liability (if any) for any other tax or duty resulting from the transfer.

(5)Except in the case of a liability imposed by law, a liability incurred by a transferor shall be taken into account only to the extent that it was incurred for a consideration in money or money’s worth.

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Amendments (Textual)

F15Words in s. 5(1) substituted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 7, 10(2)

F17 See Finance Act 1986 s. 100(1)and (2)—for any liability to tax arising on and after 25July 1986any reference in the legislation to capital transfer tax has effect as a reference to inheritance tax.

6 Excluded property.E+W+S+N.I.

(1)Property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom.

[F18(1A)A holding in an authorised unit trust and a share in an open-ended investment company is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom.]

(2)Where securities have been issued by the Treasury subject to a condition authorised by section 22 of the M1Finance (No. 2) Act 1931 (or section 47 of the M2Finance (No. 2) Act 1915) for exemption from taxation so long as the securities are in the beneficial ownership of persons [F19of a description specified in the condition], the securities are excluded property if they are in the beneficial ownership of such a person.

(3)Where the person beneficially entitled to the rights conferred by any of the following, namely—

(a)war savings certificates;

(b)national savings certificates (including Ulster savings certificates);

(c)premium savings bonds;

(d)deposits with the National Savings Bank or with a trustee savings bank;

(e)a [F20certified SAYE savings arrangement] within the meaning of [F21section 703(1) of the Income Tax (Trading and Other Income) Act 2005] ;

is domiciled in the Channel Islands or the Isle of Man, the rights are excluded property.

(4)Property to which this subsection applies by virtue of section 155(1) below is excluded property.

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Amendments (Textual)

F18S. 6(1A) inserted (with effect as stated in s. 186(8) of the amending Act) by Finance Act 2003 (c. 14), s. 186(2)

F19Words in s. 6(2) substituted (29.4.1996 with effect as mentioned in s. 154(9) of the amending Act) by 1996 c. 8, s. 154(7), Sch. 28 para. 7 (with s. 154(5))

F20Words in s. 6(3)(e) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 394(a) (with Sch. 2)

F21Words in s. 6(3)(e) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 394(b) (with Sch. 2)

Marginal Citations

RatesE+W+S+N.I.

7 Rates.E+W+S+N.I.

(1)[F22Subject to subsections (2), (4) and (5) below] the tax charged on the value transferred by a chargeable transfer made by any transferor shall be charged at the following rate or rates, that is to say—

(a)if the transfer is the first chargeable transfer made by that transferor in the period of [F23seven years] ending with the date of the transfer, at the rate or rates applicable to that value under the . . . F24 Table in Schedule 1 to this Act;

(b)in any other case, at the rate or rates applicable under that Table to such part of the aggregate of—

(i)that value, and

(ii)the values transferred by previous chargeable transfers made by him in that period,

as is the highest part of that aggregate and is equal to that value.

[F25(2)Except as provided by subsection (4) below, the tax charged on the value transferred by a chargeable transfer made before the death of the transferor shall be charged at one-half of the rate or rates referred to in subsection (1) above.]

(3)In [F26the Table] in Schedule 1 to this Act any rate shown in the third column is that applicable to such portion of the value concerned as exceeds the lower limit shown in the first column but does not exceed the upper limit (if any) shown in the second column.

[F27(4)Subject to subsection (5) below, subsection (2) above does not apply in the case of a chargeable transfer made at any time within the period of seven years ending with the death of the transferor but, in the case of a chargeable transfer made within that period but more than three years before the death, the tax charged on the value transferred shall be charged at the following percentage of the rate or rates referred to in subsection (1) above—

(a)where the transfer is made more than three but not more than four years before the death, 80 per cent;

(b)where the transfer is made more than four but not more than five years before the death, 60 per cent;

(c)where the transfer is made more than five but not more than six years before the death, 40 per cent; and

(d)where the transfer is made more than six but not more than seven years before the death, 20 per cent.

(5)If, in the case of a chargeable transfer made before the death of the transferor, the tax which would fall to be charged in accordance with subsection (4) above is less than the tax which would have been chargeable (in accordance with subsection (2) above) if the transferor had not died within the period of seven years beginning with the date of the transfer, subsection (4) above shall not apply in the case of that transfer.]

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Amendments (Textual)

F22Finance Act 1986 Sch. 19, para. 2(1)(a),with effect from 18March 1986.

F23Finance Act 1986 Sch. 19, para. 2(1)(b),with effect from 18March 1986.Originally

“ten years”.

F24 Repealed by Finance Act 1986 s. 101(3)and Sch. 19, para. 2(1)(c),with effect from 18March 1986.

F25Finance Act 1986 Sch. 19, para. 2(2),with effect from 18March 1986.Originally

“(2) Except as otherwise provided, the first Table in Schedule 1 to this Act is the appropriate Table for a transfer made on or at any time within three years of the death of the transferor, and the second Table in that Schedule is the appropriate Table for any other transfer.”

F26Finance Act 1986 Sch. 19, para. 2(3),with effect from 18March 1986.Originally

“each of the Tables”.

F27Finance Act 1986 Sch. 19, para. 2(4),with effect from 18March 1986.

8 Indexation of rate bands.E+W+S+N.I.

(1)If the retail prices index for the month of [F28September in 1993] or any later year is higher than it was for the [F28previous September], then, unless Parliament otherwise determines, section 7 above and Schedule 1 to this Act shall apply to chargeable transfers made on or after 6th April in the following year with the substitution of [F29a new Table for the Table] applying (whether by virtue of this section or otherwise) to earlier chargeable transfers.

(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F30

(2)The new [F31Table] shall differ from the [F31Table] it replaces in that for each of the amounts specified in the first and second columns there shall be substituted amounts arrived at by increasing the previous amounts by the same percentage as the percentage increase in the retail prices index and, if the result is not a multiple of £1,000, rounding it up to the nearest amount which is such a multiple.

(3)The references in this section to the retail prices index are references to the general index of retail prices (for all items) published by the [F32Office for National Statistics]; and if that index is not published for a month of [F28September] those references shall be construed as references to any substituted index or index figures published by [F33that Office].

(4)The Treasury shall before 6th April [F281994] and each subsequent 6th April make an order specifying the amounts which by virtue of this section will be treated, in relation to chargeable transfers on or after that date, as specified in the [F34Table] in Schedule 1 to this Act; and any such order shall be made by statutory instrument.

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Amendments (Textual)

F28Words in s. 8(1)(3)(4) substituted (27.7.1993: the substituting section applying in relation to chargeble transfers made on or after 6.4.1994) by 1993 c. 34, s. 197(1)(2).

F29Finance Act 1986 Sch. 19, para. 3(1),with effect from 18March 1986.Originally

“new Tables for the Tables”.

F30Finance Act 1986 Sch. 19, para. 3(2),with effect from 18March 1986.repealed by 1988, s. 136(3)and Sch.14, Part Xwith effect from 15March 1988.

F31Finance Act 1986 Sch. 19, para. 3(3),with effect from 18March 1986.Originally

“Tables”.

F32Words in s. 8(3) substituted (1.4.1996) by S.I. 1996/273, art. 5(1), Sch. 2 para. 21(a)

F33Words in s. 8(3) substituted (1.4.1996) by S.I. 1996/273, art. 5(1), Sch. 2 para. 21(b)

F34Finance Act 1986 Sch. 19, para. 3(4),with effect from 18March 1986.Originally

“Tables”.

Modifications etc. (not altering text)

C6S. 8(1) restricted (7.4.2005) by Finance Act 2005 (c. 7), s. 98(6)

C7S. 8(1) excluded (19.7.2006) by Finance Act 2006 (c. 25), s. 155(5)

C8S. 8 restricted (19.3.1997 with effect as mentioned in s. 93(2) of the amending Act) by 1997 c. 16, s. 93(2)

C9S. 8(1) excluded (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 72(2).

S. 8(1) excluded (27.7.1993) by 1993 c. 34, s. 196.

S. 8(1) excluded (3.5.1994 with effect as mentioned in s. 246 of the amending Act) by 1994 c. 9, s. 246

C10S. 8(1) restricted (24.7.2002) by 2002 c. 23, s. 118(2)

9 Transitional provisions on reduction of tax.E+W+S+N.I.

The transitional provisions in Schedule 2 to this Act shall have effect in relation to any enactment by virtue of which tax is reduced by the substitution of [F35a new Table] in Schedule 1.

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Amendments (Textual)

F35Finance Act 1986 Sch. 19, para. 4with effect from 18March 1986.Originally

“new Tables”.

Dispositions that are not transfers of valueE+W+S+N.I.

10 Dispositions not intended to confer gratuitous benefit.E+W+S+N.I.

(1)A disposition is not a transfer of value if it is shown that it was not indented, and was not made in a transaction intended, to confer any gratuitous benefit on any person and either—

(a)that it was made in a transaction at arm’s length between persons not connected with each other, or

(b)that it was such as might be expected to be made in a transaction at arm’s length between persons not connected with each other.

(2)Subsection (1) above shall not apply to a sale of [F36unquoted shares or unquoted debentures] unless it is shown that the sale was at a price freely negotiated at the time of the sale or at a price such as might be expected to have been freely negotiated at the time of the sale.

(3)In this section—

  • disposition” includes anything treated as a disposition by virtue of section 3(3) above;

  • transaction” includes a series of transactions and any associated operations.

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Amendments (Textual)

F36Finance Act 1987 Sch. 8, para. 1,with effect from 17March 1987.Originally

“shares or debentures not quoted on a recognised stock exchange”.

11 Dispositions for maintenance of family.E+W+S+N.I.

(1)A disposition is not a transfer of value if it is made by one party to a marriage [F37or civil partnership] in favour of the other party or of a child of either party and is—

(a)for the maintenance of the other party, or

(b)for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(2)A disposition is not a transfer of value if it is made in favour of a child who is not in the care of a parent of his and is for his maintenance, education or training for a period ending not later than the year in which—

(a)he attains the age of eighteen, or

(b)after attaining that age he ceases to undergo full-time education or training;

but paragraph (b) above applies only if before attaining that age the child has for substantial periods been in the care of the person making the disposition.

(3)A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance.

(4)A disposition is not a transfer of value if it is made in favour of an illegitimate child of the person making the disposition and is for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(5)Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

(6)In this section—

  • child” includes a step-child and an adopted child and “parent” shall be construed accordingly;

  • [F38civil partnership”, in relation to a disposition made on the occasion of the dissolution or annulment of a civil partnership, and in relation to a disposition varying a disposition so made, includes a former civil partnership;]

  • dependent relative” means in relation to any person—

    (a)

    a relative of his, or of his spouse [F39or civil partner] , who is incapacitated by old age or infirmity from maintaining himself, or

    (b)

    [F40his mother or father or his spouse's or civil partner's mother or father;]

  • marriage”, in relation to a disposition made on the occasion of the dissolution or annulment of a marriage, and in relation to a disposition varying a disposition so made, includes a former marriage;

  • year” means period of twelve months ending with 5th April.

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Amendments (Textual)

F38S. 11(6): definition of "civil partnership" inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 4(3)(b)

F39S. 11(6): words in definition of "dependent relative" inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 4(3)(a)(i)

F40S. 11(6): words in definition of "dependent relative" substituted (5.12.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 4(3)(a)(ii)

12 Dispositions allowable for income tax or conferring under pension scheme.E+W+S+N.I.

(1)A disposition made by any person is not a transfer of value if it is allowable in computing that person’s profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.

(2)Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if [F41it is a contribution under a registered pension scheme or section 615(3) scheme in respect of an employee of the person making the disposition.]

[F42(2A)Subsection (2B) below applies where a person who is a member of a registered pension scheme, and who has not reached the age of 75, has omitted to exercise pension rights under the pension scheme and, if the words “(or latest time)” were omitted from subsection (3) of section 3 above,—

(a)that subsection would have treated the person as having made a disposition by reason of omitting to exercise the pension rights, but

(b)section 10 above would have prevented the disposition being a transfer of value.

(2B)Section 3(3) above does not actually treat the person as making a disposition by reason of omitting to exercise the pension rights (at the latest time when the person could have exercised them) unless the condition in subsection (2C) below is satisfied.

(2C)That condition is that—

(a)the person makes an actual pensions disposition under the pension scheme which is not prevented from being a transfer of value by section 10 above within the period of two years ending with the date of his death, and

(b)it is not shown that, when he made the actual pensions disposition, he had no reason to believe that he would die within that period.

(2D)A disposition treated by virtue of section 3(3) above as made by any person who is a member of a registered pension scheme, and who has not reached the age of 75, by reason of omitting to exercise pension rights under the pension scheme is not a transfer of value to the extent that it results in—

(a)the provision of a lump sum death benefit or pension death benefit (or both) to a relevant dependant, or

(b)the making of a payment to a charity.

(2E)A disposition made by a person who is a member of a registered pension scheme, and who has reached the age of 75, is not a transfer of value if the disposition consists in the person—

(a)making an actual pensions disposition under the pension scheme, or

(b)omitting to exercise pension rights under the pension scheme.

(2F)For the purposes of this section—

(a)a person omits to exercise pension rights under a pension scheme if he does not become entitled to the whole or any part of a pension or lump sum (or both) under the pension scheme at a time when he was eligible to become so entitled (whether or not he does become entitled to any other benefits under the pension scheme); and

(b)a person makes an actual pensions disposition under a registered pension scheme if he makes a disposition within section 3(1) above by doing anything in relation to, or to rights under, the pension scheme.

(2G)In this section—

  • entitled”, in relation to a pension or lump sum, shall be construed in accordance with section 165(3) or 166(2) of the Finance Act 2004;

  • lump sum death benefit” has the same meaning as in Part 4 of that Act (see section 168(2) of that Act);

  • pension” has the same meaning as in that Part of that Act (see section 165(2) of that Act);

  • pension death benefit” has the meaning given by section 167(2) of that Act; and

  • relevant dependant”, in relation to a person, means a dependant (within the meaning given by paragraph 15 of Schedule 28 to that Act) who is the person's spouse or civil partner immediately before his death or someone who is financially dependent on the person at that time.]

(3)F43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)F43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

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Amendments (Textual)

F41Words in s. 12(2) substituted (6.4.2006) by Finance Act 2004 (c. 12), ss. 203(2)(a), 284 (with Sch. 36)

13 Dispositions by close companies for benefit of employees.E+W+S+N.I.

(1)A disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in section 86(1) below is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(a)the persons employed by or holding office with the company, or

(b)the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(2)Subsection (1) above shall not apply if the trusts permit any of the property to be applied at any time (whether during any such period as is referred to in section 86(1) below or later) for the benefit of—

(a)a person who is a participator in the company making the disposition, or

(b)any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value, or

(c)any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company, or

(d)any person who is connected with any person within paragraph (a), (b) or (c) above.

(3)The participators in a company who are referred to in subsection (2) above do not include any participator who—

(a)is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b)on a winding-up of the company would not be entitled to 5 per cent. or more of its assets.

(4)In determining whether the trusts permit property to be applied as mentioned in subsection (2) above, no account shall be taken—

(a)of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(b)if the trusts are those of a profit sharing scheme approved under [F44Schedule 9 to the M3Taxes Act 1988], of any power to appropriate shares in pursuance of the scheme [F45; or].

[F45(c)if the trusts are those of [F46a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003] , of any power to appropriate shares to, or acquire shares on behalf of, individuals under the plan.]

(5)In this section—

  • close company” and “participator” have the same meanings as in Part IV of this Act;

  • ordinary shares” means shares which carry either—

    (a)

    a right to dividends not restricted to dividends at a fixed rate, or

    (b)

    a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above,

  • subsidiary” has [F47the meaning given by section 736 of] the [F48M4Companies Act 1985];

and references in subsections (2) and (3) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.

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Amendments (Textual)

F44 Substituted by Income and Corporation Taxes Act 1988 (c. 1. SIF 63:1), Sch. 29, para. 32.Originally

“the Finance Act 1978”.

F45S. 13(4)(c) and the word “or”immediately preceding it inserted (28.7.2000) by 2000 c. 17, s. 138(2)

F46Words in s. 13(4)(c) substituted (with effect as mentioned in s. 723(1)(a)(b) (subject to Sch. 7) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), ss. 722, 723(1), Sch. 6 para. 151(1)(a)(2)

F47Companies Act 1989 s. 144(4)and Sch. 18 para. 30(2),with effect from the appointed day—on and after 1November 1990 (S.I. 1990 No.1392).Originally

“the same meaning as in”.

F48Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), Sch. 2,with effect from 1July 1985.Originally

“Companies Act 1948”.

Marginal Citations

14 Waiver of remuneration.E+W+S+N.I.

(1)Subject to subsection (2) below, the waiver or repayment of an amount of remuneration is not a transfer of value if, apart from the waiver or repayment, that amount [F49would be earnings, or would be treated as earnings, and would constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003)] .

(2)Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section shall apply only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.

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Amendments (Textual)

F49Words in s. 14(1) substituted (with effect as mentioned in s. 723(1)(a)(b) (subject to Sch. 7) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), ss. 722, 723(1), Sch. 6 para. 152

15 Waiver of dividends.E+W+S+N.I.

A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.

16 Grant of tenancies of agricultural property.E+W+S+N.I.

(1)The grant of a tenancy of agricultural property in the United Kingdom, the Channel Islands or the Isle of Man for use for agricultural purposes is not a transfer of value by the grantor if he makes it for full consideration in money or money’s worth.

(2)Expressions used in subsection (1) above and in Chapter II of Part V of this Act have the same meaning in that subsection as in that Chapter.

17 Changes in distribution of deceased’s estate, etc.E+W+S+N.I.

None of the following is a transfer of value—

(a)a variation or disclaimer to which section 142(1) below applies;

(b)a transfer to which section 143 below applies;

(c)an election by a surviving spouse [F50or civil partner] under section 47A of the Administration of M5Estates Act 1925;

(d)the renunciation of a claim to legitim [F51or rights under section 131 of the Civil Partnership Act 2004] within the period mentioned in section 147(6) below.

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Amendments (Textual)

Marginal Citations

PART IIE+W+S+N.I. EXEMPT TRANSFERS

CHAPTER IE+W+S+N.I. GENERAL

18 Transfers between spouses [F52or civil partners].E+W+S+N.I.

(1)A transfer of value is an exempt transfer to the extent that the value transferred is attributable to property which becomes comprised in the estate of the transferor’s spouse [F53or civil partner] or, so far as the value transferred is not so attributable, to the extent that that estate is increased.

(2)If, immediately before the transfer, the transferor but not the transferor’s spouse [F54or civil partner] is domiciled in the United Kingdom the value in respect of which the transfer is exempt (calculated as a value on which no tax is chargeable) shall not exceed £55,000 less any amount previously taken into account for the purposes of the exemption conferred by this section.

(3)Subsection (1) above shall not apply in relation to property if the testamentary or other disposition by which it is given—

(a)takes effect on the termination after the transfer of value of any interest or period, or

(b)depends on a condition which is not satisfied within twelve months after the transfer;

but paragraph (a) above shall not have effect by reason only that the property is given to a spouse [F55or civil partner] only if he survives the other spouse [F55or civil partner] for a specified period.

(4)For the purposes of this section, property is given to a person if it becomes his property or is held on trust for him.

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Amendments (Textual)

F52Words in s. 18 sidenote inserted (5.12.2005) by virtue of The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 7(5)

19 Annual exemption.E+W+S+N.I.

(1)Transfers of value made by a transferor in any one year are exempt to the extent that the values transferred by them (calculated as values on which no tax is chargeable) do not exceed £3,000.

(2)Where those values fall short of £3,000, the amount by which they fall short shall, in relation to the next following year, be added to the £3,000 mentioned in subsection (1) above.

(3)Where those values exceed £3,000, the excess—

(a)shall, as between transfers made on different days, be attributed so far as possible to a later rather than an earlier transfer, and

(b)shall, as between transfers made on the same day, be attributed to them in proportion to the values transferred by them.

[F56(3A)A transfer of value which is a potentially exempt transfer—

(a)shall in the first instance be left out of account for the purposes of subsections (1) to (3) above; and

(b)if it proves to be a chargeable transfer, shall for the purposes of those subsections be taken into account as if, in the year in which it was made, it was made later than any transfer of value which was not a potentially exempt transfer.]

(4)In this section “year” means period of twelve months ending with 5th April.

(5)Section 3(4) above shall not apply for the purposes of this section (but without prejudice to sections 57 and 94(5) below).

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Amendments (Textual)

F56Finance Act 1986 Sch. 19, para. 5,in relation to transfers of value made on or after 18March 1986.

20 Small gifts.E+W+S+N.I.

(1)Transfers of value made by a transferor in any one year by outright gifts to any one person are exempt if the values transferred by them (calculated as values on which no tax is chargeable) do not exceed £250.

(2)In this section “year” means period of twelve months ending with 5th April.

(3)Section 3(4) above shall not apply for the purposes of this section.

21 Normal expenditure out of income.E+W+S+N.I.

(1)A transfer of value is an exempt transfer if, or to the extent that, it is shown—

(a)that it was made as part of the normal expenditure of the transferor, and

(b)that (taking one year with another) it was made out of his income, and

(c)that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living.

(2)A payment of a premium on a policy of insurance on the transferor’s life, or a gift of money or money’s worth applied, directly or indirectly, in payment of such a premium, shall not for the purposes of this section be regarded as part of his normal expenditure if, when the insurance was made or at any earlier or later time, an annuity was purchased on his life, unless it is shown that—

(a)the purchase of the annuity, and

(b)the making or any variation of the insurance or of any prior insurance for which the first-mentioned insurance was directly or indirectly substituted,

were not associated operations.

(3)So much of a purchased life annuity (within the meaning of [F57section 423 of the Income Tax (Trading and Other Income) Act 2005] as is, [F58exempt from income tax under section 717 of that Act] , shall not be regarded as part of the transferor’s income for the purposes of this section.

(4)Subsection (3) above shall not apply to annuities purchased before 13th November 1974.

(5)Section 3(4) above shall not apply for the purposes of this section.

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Amendments (Textual)

F57Words in s. 21(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 395(a) (with Sch. 2)

F58Words in s. 21(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 882, 883, Sch. 1 para. 395(b) (with Sch. 2)

22 Gifts in consideration of marriage [F59or civil partnership].E+W+S+N.I.

(1)Transfers of value made by gifts in consideration of marriage [F60or civil partnership] are exempt to the extent that the values transferred by such transfers made by any one transferor in respect of any one marriage [F60or civil partnership](calculated as values on which no tax is chargeable) do not exceed—

(a)in the case of gifts within subsection (2) below by a parent of a party to the marriage [F60or civil partnership] , £5,000,

(b)in the case of other gifts within subsection (2) below, £2,500, and

(c)in any other case £1,000;

any excess being attributed to the transfers in proportion to the values transferred.

(2)A gift is within this subsection if—

(a)it is an outright gift to a child or remoter descendant of the transferor or

(b)the transferor is a parent or remoter ancestor of either party to the marriage [F61or civil partnership] , and either the gift is an outright gift to the other party to the marriage [F61or civil partnership] or the property comprised in the gift is settled by the gift, or

(c)the transferor is a party to the marriage [F61or civil partnership] , and either the gift is an outright gift to the other party to the marriage [F61or civil partnership] or the property comprised in the gift is settled by the gift;

and in this section “child” includes an illegitimate child, an adopted child and a step-child and “parent”, “descendant” and “ancestor” shall be construed accordingly.

(3)A disposition which is an outright gift shall not be treated for the purposes of this section as a gift made in consideration of marriage [F62or civil partnership] if, or in so far as, it is a gift to a person other than a party to the marriage [F62or civil partnership] .

(4)A disposition which is not an outright gift shall not be treated for the purposes of this section as a gift made in consideration of marriage [F63or civil partnership] if the persons who are or may become entitled to any benefit under the disposition include any person other than—

[F64(a)the parties to the marriage or civil partnership, any child of the family of the parties to the marriage or civil partnership, or a spouse or civil partner of any such child;]

(b)persons becoming entitled on the failure of trusts for any such [F65child] under which trust property would (subject only to any power of appointment to a person falling within paragraph (a) or (c) of this subsection) vest indefeasibly on the attainment of a specified age or either on the attainment of such an age or on some earlier event, or persons becoming entitled (subject as aforesaid) on the failure of any limitation in tail;

[F66(c)a subsequent spouse or civil partner of a party to the marriage or civil partnership, any child of the family of the parties to any such subsequent marriage or civil partnership, or a spouse or civil partner of any such child;]

(d)persons becoming entitled under such trusts, subsisting under the law of England and Wales or of Northern Ireland, as are specified in section 33(1) of the M6Trustee Act 1925 or section 34(1) of the M7Trustee Act (Northern Ireland) 1958 (protective trusts), the principal beneficiary being a person falling within paragraph (a) or (c) of this subsection, or under such trusts, modified by the enlargement, as respects any period during which there is no such [F67child] as aforesaid in existence, of the class of potential beneficiaries specified in paragraph (ii) of the said section 33(1) or paragraph (b) of the said section 34(1);

(e)persons becoming entitled under trusts subsisting under the law of Scotland and corresponding with such trusts as are mentioned in paragraph (d) above;

(f)as respects a reasonable amount of remuneration, the trustees of the settlement.

[F68(4A)In subsection (4) “child of the family”, in relation to parties to a marriage or civil partnership, means a child of one or both of them.]

(5)F69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)Section 3(4) above shall not apply for the purposes of this section (but without prejudice to section 57 below).

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Amendments (Textual)

F59Words in s. 22 sidenote inserted (5.12.2005) by virtue of The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(8)

F63Words in s. 22(4) inserted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(5)(a)

F64S. 22(4)(a) substituted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(5)(b)

F65Word in s. 22(4)(b) substituted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(5)(c)

F66S. 22(4)(c) substituted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(5)(d)

F67Word in s. 22(4)(d) substituted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(5)(e)

F68S. 22(4A) inserted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(6)

F69S. 22(5) omitted (5.12.2005 with effect in accordance with reg. 1(3) of the amending S.I.) by virtue of The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 8(7)

Marginal Citations

23 Gifts to charities.E+W+S+N.I.

(1)Transfers of value are exempt to the extent that the values transferred by them are attributable to property which is given to charities.

(2)Subsection (1) above shall not apply in relation to property if the testamentary or other disposition by which it is given—

(a)takes effect on the termination after the transfer of value of any interest or period, or

(b)depends on a condition which is not satisfied within twelve months after the transfer, or

(c)is defeasible;

and for this purpose any disposition which has not been defeated at a time twelve months after the transfer of value and is not defeasible after that time shall be treated as not being defeasible (whether or not it was capable of being defeated before that time).

(3)Subsection (1) above shall not apply in relation to property which is an interest in other property if—

(a)that interest is less than the donor’s, or

(b)the property is given for a limited period;

and for this purpose any question whether an interest is less than the donor’s shall be decided as at a time twelve months after the transfer of value.

(4)Subsection (1) above shall not apply in relation to any property if—

(a)the property is land or a building and is given subject to an interest reserved or created by the donor which entitled him, his spouse [F70or civil partner] or a person connected with him to possession of, or to occupy, the whole or any part of the land or building rent-free or at a rent less than might be expected to be obtained in a transaction at arm’s length between persons not connected with each other, or

(b)the property is not land or a building and is given subject to an interest reserved or created by the donor other than—

(i)an interest created by him for full consideration in money or money’s worth, or

(ii)an interest which does not substantially affect the enjoyment of the property by the person or body to whom it is given;

and for this purpose any question whether property is given subject to an interest shall be decided as at a time twelve months after the transfer of value.

(5)Subsection (1) above shall not apply in relation to property if it or any part of it may become applicable for purposes other than charitable purposes or those of a body mentioned in section 24, [F71or 25] below [F72or, where it is land, of a body mentioned in section 24A below].

(6)For the purposes of this section property is given to charities if it becomes the property of charities or is held on trust for charitable purposes only, and “donor” shall be construed accordingly.

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Amendments (Textual)

F71Words in s. 23(5) substituted (31.7.1998 with effect in relation to any transfer of value made on or after 17.3.1998) by 1998 c. 36, s. 143(2)(a)

F72Finance Act 1989 s. 171(2),in relation to transfers of value made on or after 14March 1989.

Modifications etc. (not altering text)

C11S. 23 modified (24.7.2002 with effect as mentioned in s. 58(4) of the amending Act) by 2002 c. 23, s. 58, Sch. 18 Pt. 3, para. 9(2)

24 Gifts to political parties.E+W+S+N.I.

(1)Transfers of value are exempt to the extent that the values transferred by them—

(a)are attributable to property which becomes the property of a political party qualifying for exemption under this section; . . . F73

(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F73

(2)A political party qualifies for exemption under this section if, at the last general election preceding the transfer of value,—

(a)two members of that party were elected to the House of Commons, or

(b)one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.

(3)Subsections (2) to (5) of section 23 above shall apply in relation to subsection (1) above as they apply in relation to section 23(1).

(4)For the purposes of section 23(2) to (5) as they apply by virtue of subsection (3) above property is given to any person or body if it becomes the property of or is held on trust for that person or body, and “donor” shall be construed accordingly.

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Amendments (Textual)

F73 Repealed by Finance Act 1988 s. 137and Sch.14, Part Xin relation to transfers of value made on or after 15March 1988.

Modifications etc. (not altering text)

C12S. 24 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the applying Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 264(8), 289(with ss. 60, 101(1), 201(3)).

[F7424A Gifts to housing associations.E+W+S+N.I.

(1)A transfer of value is exempt to the extent that the value transferred by it is attributable to land in the United Kingdom given to a [F75body falling within subsection (2) below].

[F76(2)A body falls within this subsection if it is—

(a)a registered social landlord within the meaning of Part I of the Housing Act 1996;

(b)a registered housing association within the meaning of the Housing Associations Act 1985; or

(c)a registered housing association within the meaning of Part II of the Housing (Northern Ireland) Order 1992..]

(3)Subsections (2) to (5) of section 23 and subsection (4) of section 24 above shall apply in relation to subsection (1) above as they apply in relation to section 24(1).]

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Amendments (Textual)

F74Finance Act 1989 s. 171(1),with effect from 14March 1989.

F75Words in s. 24A(1) substituted (1.10.1996) by S.I. 1996/2325, art. 5(1), Sch. 2 para. 12(2)

25 Gifts for national purposes, etc.E+W+S+N.I.

(1)A transfer of value is an exempt transfer to the extent that the value transferred by it is attributable to property which becomes the property of a body within Schedule 3 to this Act.

(2)Subsections (2) to (5) of section 23 and subsection (4) of section 24 above shall apply in relation to subsection (1) above as they apply in relation to section 24(1), except that section 23(3) shall not prevent subsection (1) above from applying in relation to property consisting of the benefit of an agreement restricting the use of land.

F7726. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E+W+S+N.I.

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Amendments (Textual)

F77S. 26 repealed (31.7.1998 with effect as mentioned in s. 143(1) of the amending Act) by 1998 c. 36, ss. 143(1), 165(1), Sch. 27 Pt. IV, note 1

[F7826A Potentially exempt transfer of property subsequently held for national purposes etc.E+W+S+N.I.

A potentially exempt transfer which would (apart from this section) have proved to be a chargeable transfer shall be an exempt transfer to the extent that the value transferred by it is attributable to property which has been or could be designated under section 31(1) below and which, during the period beginning with the date of the transfer and ending with the death of the transferor,—

(a)has been disposed of by sale by private treaty to a body mentioned in Schedule 3 to this Act or has been disposed of to such a body otherwise than by sale, or

(b)has been disposed of in pursuance of section 230 below.]

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Amendments (Textual)

F78Finance Act 1986 Sch. 19, para. 6,in relation to transfers of value made on or after 18March 1986.

27 Maintenance funds for historic buildings, etc.E+W+S+N.I.

(1)[F79Subject to subsection (1A) below,] a transfer of value is an exempt transfer to the extent that the value transferred by it is attributable to property which by virtue of the transfer becomes comprised in a settlement and in respect of which—

(a)a direction under paragraph 1 of Schedule 4 to this Act has effect at the time of the transfer, or

(b)such a direction is given after the time of the transfer.

[F80(1A)Subsection (1) above does not apply in the case of a direction given after the time of the transfer unless the claim for the direction (if it is not made before that time) is made no more than two years after the date of that transfer, or within such longer period as the Board may allow.]

(2)Subsections (2) and (3) of the section 23 and subsection (4) of section 24 above shall apply in relation to subsection (1) above as they apply in relation to section 24(1).

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Amendments (Textual)

F79Words in s. 27(1) inserted (31.7.1998 with effect in relation to transfers of value made on or after 17.3.1998) by 1998 c. 36, s. 144(1)(2)

F80S. 27(1A) inserted (31.7.1998 with effect in relation to transfers of value made on or after 17.3.1998) by 1998 c. 36, s. 144(1)(2)

28 Employee trusts.E+W+S+N.I.

(1)A transfer of value made by an individual who is beneficially entitled to shares in a company is an exempt transfer to the extent that the value transferred is attributable to shares in or securities of the company which become comprised in a settlement if—

(a)the trusts of the settlement are of the description specified in section 86(1) below, and

(b)the persons for whose benefit the trusts permit the settled property to be applied include all or most of the persons employed by or holding office with the company.

(2)Subsection (1) above shall not apply unless at the date of the transfer, or at a subsequent date not more than one year thereafter, both the following conditions are satisfied, that is to say—

(a)the trustees—

(i)hold more than one half of the ordinary shares in the company, and

(ii)have powers of voting on all questions affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised on them; and

(b)there are no provisions in any agreement or instrument affecting the company’s constitution or management or its shares or securities whereby the condition in paragraph (a) above can cease to be satisfied without the consent of the trustees.

(3)Where the company has shares or securities of any class giving powers of voting limited to either or both of the following—

(a)the question of winding up the company, and

(b)any question primarily affecting shares or securities of that class,

the reference in subsection (2)(a)(ii) above to all questions affecting the company as a whole shall be read as a reference to all such questions except any in relation to which those powers are capable of being exercised.

(4)Subsection (1) above shall not apply if the trusts permit any of the settled property to be applied at any time (whether during any such period as is referred to in section 86(1) below or later) for the benefit of—

(a)a person who is a participator in the company mentioned in subsection (1) above; or

(b)any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for section 13 above would have been a transfer of value; or

(c)any other person who has been a participator in the company mentioned in subsection (1) above or in any such company as is mentioned in paragraph (b) above at any time after, or during the ten years before, the transfer of value mentioned in subsection (1) above; or

(d)any person who is connected with any person within paragraph (a), (b) or (c) above.

(5)The participators in a company who are referred to in subsection (4) above do not include any participator who—

(a)is not beneficially entitled to, or to rights entitling him to acquire, 5 per cent. or more of, or of any class of the shares comprised in, its issued share capital, and

(b)on a winding-up of the company would not be entitled to 5 per cent. or more of its assets.

(6)In determining whether the trusts permit property to be applied as mentioned in subsection (4) above, no account shall be taken of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident.

(7)Subsection (5) of section 13 above shall have effect in relation to this section as it has effect in relation to that section.

29 Loans—modifications of exemptions.E+W+S+N.I.

(1)If or to the extent that a transfer of value is a disposition whereby the use of money or other property is allowed by one person to another (“the borrower”), the preceding provisions of this Chapter shall apply to it with the following modification.

(2)For the purposes of section 18 the borrower’s estate shall be treated as increased by an amount equal to the value transferred; and section 18(3) shall not apply.

(3)For the purposes of sections 20 and 22 the transfer of value shall be treated as made by outright gift.

(4)Section 21(1) shall apply as if for the conditions stated in paragraphs (a) and (b) there were substituted the condition that the transfer was a normal one on the part of the transferor.

(5)For the purposes of sections 23 [F81to 25]

(a)the value transferred shall be treated as attributable to the property of which the borrower is allowed the use, and

(b)that property shall be treated as given to, or as becoming the property of, the borrower unless the use allowed includes use for purposes other than charitable purposes or those of a body mentioned in section 24, [F81or 25][F82or where it is land, of a body mentioned in section 24A]

and sections 23(2) to (6), 24 . . . F83, (3) and (4), [F8224A(3)][F81and 25(2)] shall not apply.

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Amendments (Textual)

F81Words in s. 29(5) substituted (31.7.1998 with effect in relation to any transfer of value made on or after 17.3.1998) by 1998 c. 36, s. 143(2)(b)

F82Finance Act 1989 s. 171(3),in relation to transfers of value made on or after 14March 1989.

F83 “(1)(b)”

repealed by Finance Act 1988 s. 148and Sch. 14, Part X,with effect from 15March 1988.

[F8429A Abatement of exemption where claim settled out of beneficiary’s own resources.E+W+S+N.I.

(1)This section applies where—

(a)apart from this section the transfer of value made on the death of any person is an exempt transfer to the extent that the value transferred by it is attributable to an exempt gift, and

(b)the exempt beneficiary, in settlement of the whole or part of any claim against the deceased’s estate, effects a disposition of property not derived from the transfer.

(2)The provisions of this Act shall have effect in relation to the transfer as if—

(a)so much of the relevant value as is equal to the following amount, namely the amount by which the value of the exempt beneficiary’s estate immediately after the disposition is less than it would be but for the disposition, or

(b)where that amount exceeds the relevant value, the whole of the relevant value,

were attributable to such a gift to the exempt beneficiary as is mentioned in subsection (3) below (instead of being attributable to a gift with respect to which the transfer is exempt).

(3)The gift referred to in subsection (2) above is a specific gift with respect to which the transfer is chargeable, being a gift which satisfies the conditions set out in paragraphs (a) and (b) of section 38(1) below.

(4)In determining the value of the exempt beneficiary’s estate for the purposes of subsection (2) above—

(a)no deduction shall be made in respect of the claim referred to in subsection (1)(b) above, and

(b)where the disposition referred to in that provision constitutes a transfer of value—

(i)no account shall be taken of any liability of the beneficiary for any tax on the value transferred, and

(ii)sections 104 and 116 below shall be disregarded.

(5)Subsection (1)(b) above does not apply in relation to any claim against the deceased’s estate in respect of so much of any liability as is, in accordance with this Act, to be taken into account in determining the value of the estate.

(6)In this section—

  • exempt gift”, in relation to a transfer of value falling within subsection (1)(a) above, means—

    (a)

    a gift with respect to which the transfer is (apart from this section) exempt by virtue of the provisions of any sections 18 and 23 to 28 above, or

    (b)

    where (apart from this section) the transfer is so exempt with respect to a gift up to a limit, so much of the gift as is within that limit;

  • the exempt beneficiary”, in relation to an exempt gift, means any of the following, namely—

    (a)

    where the gift is exempt by virtue of section 18 above, the deceased’s spouse [F85or civil partner] ,

    (b)

    where the gift is exempt by virtue of section 23 above, any person or body—

    (i)

    whose property the property falling within subsection (1) of that section becomes, or

    (ii)

    by whom that property is held on trust for charitable purposes,

    (c)

    where the gift is exempt by virtue of section 24, [F86or 25] above, any body whose property the property falling within subsection (1) of that section becomes,

    (d)

    where the gift is exempt by virtue of section 24A above, any body to whom the land falling within subsection (1) of that section is given, and

    (e)

    where the gift is exempt by virtue of section 27 or 28 above, the trustees of any settlement in which the property falling within subsection (1) of that section becomes comprised;

  • gift” and “specific gift” have the same meaning as in Chapter III of this Part; and

  • the relevant value”, in relation to a transfer of value falling within subsection (1)(a) above, means so much of the value transferred by the transfer as is attributable to the gift referred to in that provision.]

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Amendments (Textual)

F84Finance Act 1989 s. 172(1),in relation to deaths occurring on or after 27July 1989.

F85S. 29A(6): words in the definition of "the exempt beneficiary" inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 10

F86S. 29A(6): words in the definition of “the exempt beneficiary” substituted (31.7.1998 with effect in relation to any transfer of value made on or after 17.3.1998) by 1998 c. 36, s. 143(2)(a)

CHAPTER IIE+W+S+N.I. CONDITIONAL EXEMPTION

30 Conditionally exempt transfers. E+W+S+N.I.

(1)A transfer of value is an exempt transfer to the extent that the value transferred by it is attributable to property—

(a)which, on a claim made for the purpose, is designated by the Treasury under section 31 below, and

(b)with respect to which the requisite undertaking described in that section is given by such person as the Treasury think appropriate in the circumstances of the case [F87or (where the property is an area of land within subsection (1)(d) of that section) with respect to which the requisite undertakings described in that section are given by such person or persons as the Treasury think appropriate in the circumstances of the case.]

(2)A transfer of value exempt with respect to any property under this section or under section 76 of the M8Finance Act 1976 is referred to in this Act as a conditionally exempt transfer of that property.

(3)Subsection (1) above shall not apply to a transfer of value other than one which under section 4 above a person makes on his death unless—

(a)the transferor or his spouse [F88or civil partner] , or the transferor and his spouse [F88or civil partner] between them, have been beneficially entitled to the property throughout the six years ending with the transfer, or

(b)the transferor acquired the property on a death on the occasion of which there was a transfer of value under section 4 above which was itself a conditionally exempt transfer of the property.

[F89(3A)The provisions of this section shall be disregarded in determining under section 3A above whether a transfer of value is a potentially exempt transfer.

(3B)No claim may be made under subsection (1) above with respect to a potentially exempt transfer until the transferor has died.

[F90(3BA)A claim under subsection (1) above must be made no more than two years after the date of the transfer of value to which it relates or, in the case of a claim with respect to a potentially exempt transfer, the date of the death, or (in either case) within such longer period as the Board may allow.]

(3C)Subsection (1) above shall not apply to a potentially exempt transfer to the extent that the value transferred by it is attributable to property which has been disposed of by sale during the period beginning with the date of the transfer and ending with the death of the transferor.]

(4)Subsection (1) above does not apply to a transfer of value to the extent to which it is an exempt transfer under section 18 or 23 above.

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Amendments (Textual)

F87Finance Act 1985 Sch. 26, para. 1,in relation to events occurring after 18March 1985.

F89Finance Act 1986 Sch. 19, para. 7,in relation to transfers of value made on or after 18March 1986.

F90S. 30(3BA) inserted (31.7.1998 with effect in relation to any transfer of value or death on or after 17.3.1998) by 1998 c. 36, s. 142, Sch. 25 para. 2(1)(2)

Modifications etc. (not altering text)

C13 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

Marginal Citations

31 Designation and undertakings. E+W+S+N.I.

(1)The Treasury may designate under this section—

[F91(a)any relevant object which appears to the Board to be pre-eminent for its national, scientific, historic or artistic interest;

(aa)any collection or group of relevant objects which, taken as a whole, appears to the Board to be pre-eminent for its national, scientific, historic or artistic interest;]

(b)any land which in the opinion of the Treasury is of outstanding scenic or historic or scientific interest;

(c)any building for the preservation of which special steps should in the opinion of the Treasury be taken by reason of its outstanding historic or architectural interest;

[F92(d)any area of land which in the opinion of the Treasury is essential for the protection of the character and amenities of such a building as is mentioned in paragraph (c) above;]

(e)any object which in the opinion of the Treasury is historically associated with such a building as is mentioned in paragraph (c) above.

[F93(1A)Where the transfer of value in relation to which the claim for designation is made is a potentially exempt transfer which (apart from section 30 above) has proved to be a chargeable transfer, the question whether any property is appropriate for designation under this section shall be determined by reference to circumstances existing after the death of the transferor.]

(2)In the case of property within subsection [F94(1)(a)or(aa)] above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise—

(a)the property will be kept permanently in the United Kingdom and will not leave it temporarily except for a purpose and a period approved by the Treasury, and

(b)[F95such steps as are agreed between the Treasury and the person giving the undertaking, and are set out in it,] will be taken for the preservation of the property and for securing reasonable access to the public.

(3)If it appears to the Treasury, on a claim made for the purpose, that any documents which are designated or to be designated under subsection [F94(1)(a) or (aa)] above contain information which for personal or other reasons ought to be treated as confidential, they may exclude those documents, either altogether or to such extent as they think fit, from so much of an undertaking given or to be given under subsection (2)(b) above as relates to public access.

(4)In the case of other property within subsection (1) above, the requisite undertaking is that, until the person beneficially entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise, [F96such steps as are agreed between the Treasury and the person giving the undertaking, and are set out in it,] will be taken—

(a)in the case of land falling within subsection (1)(b) above, for the maintenance of the land and the preservation of its character, and

(b)in the case of any other property, for the maintenance, repair and preservation of the property and, if it is an object falling within subsection (1)(e) above, for keeping it associated with the building concerned;

and for securing reasonable access to the public.

[F97(4A)In the case of an area of land within subsection (1)(d) above (relevant land) there is an additional requisite undertaking, which is that, until the person beneficially entitled to property falling within subsection (4C) below dies, or it is disposed of, whether by sale or gift or otherwise, specified steps will be taken for its maintenance, repair and preservation and for securing reasonable access to the public; and “specified steps” means such steps as are agreed between the Treasury and the person giving the undertaking, and are set out in it.

(4B)Where different persons are entitled (either beneficially or otherwise) to different properties falling within subsection (4C) below, subsection (4A) above shall have effect to require separate undertakings as to the maintenance, repair, preservation and access of each of the properties to be given by such persons as the Treasury think appropriate in the circumstances of the case.

(4C)The following property falls within this subsection—

(a)the building for the protection of whose character and amenities the relevant land is in the opinion of the Treasury essential;

(b)any other area (or areas) of land which, in relation to the building, falls (or fall) within subsection (1)(d) above and which either lies (or lie) between the relevant land and the building or is (or are) in the opinion of the Treasury, physically closely connected with the relevant land or the building.

(4D)Where subsection (4A) above requires an undertaking for the maintenance, repair, preservation and access of property, such an undertaking is required notwithstanding that some other undertaking for its maintenance, repair, preservation and access is effective.

(4E)Any undertaking given in pursuance of subsection (4A) above is for the purposes of this Act given with respect to the relevant land.

(4F)It is for the person seeking the designation of relevant land to secure that any undertaking required under subsection (4A) above is given.]

[F98(4FA)For the purposes of this section, the steps agreed for securing reasonable access to the public must ensure that the access that is secured is not confined to access only where a prior appointment has been made.]

[F99(4FB)Subject to subsection (3) above, where the steps that may be set out in any undertaking include steps for securing reasonable access to the public to any property, the steps that may be agreed and set out in that undertaking may also include steps involving the publication of—

(a)the terms of any undertaking given or to be given for any of the purposes of this Act with respect to the property; or

(b)any other information relating to the property which (apart from this subsection) would fall to be treated as confidential;

and references in this Act to an undertaking for access to any property shall be construed as including references to so much of any undertaking as provides for the taking of steps involving any such publication.]

[F100(4G)In a case where—

(a)the transfer of value in question is a potentially exempt transfer which (apart from section 30 above) has proved to be a chargeable transfer, and

(b)at the time of the transferor’s death an undertaking by such a person as is mentioned in section 30(1)(b) above given under paragraph 3(3) of Schedule 4 to this Act or under section [F101258 of the 1992 Act] is in force with respect to any property to which the value transferred by the transfer is attributable,

that undertaking shall be treated for the purposes of this Chapter as an undertaking given under section 30 above.]

[F102(5)In this section—

  • ’national interest’ includes interest within any part of the United Kingdom; and

  • ’relevant object’ means—

    (a)

    a picture, print, book, manuscript, work of art or scientific object, or

    (b)

    anything not falling within paragraph (a) above that does not yield income;

and in determining under subsection (1)(a) or (aa) above whether an object or a collection or group of objects is pre-eminent, regard shall be had to any significant association of the object, collection or group with a particular place.]

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Amendments (Textual)

F91S. 31(1)(a)(aa) substituted for s. 31(1)(a) (31.7.1998 with effect in relation to the making of any designation on a claim made on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 4(1)(4)

F92Finance Act 1985 Sch. 26, para. 2(2),in relation to events occurring after 18March 1985.Originally

“any land which adjoins such a building as is mentioned in paragraph (c) above and which in the opinion of the Treasury is essential for the protection of the character and amenities of the building.”

F93Finance Act 1986 Sch. 19, para. 8(1),in relation to transfers of value made on or after 18March 1986.

F94Words in s. 31(2)(3) substituted (31.7.1998 with effect in relation to the making of any designation on a claim made on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 4(2)(4)

F95Finance Act 1985 Sch. 26, para. 2(3),in relation to events occurring after 18March 1985.Originally

“reasonable steps”.

F96Finance Act 1985 Sch. 26, para. 2(3),in relation to events occurring after 18March 1985.Originally

“reasonable steps”.

F97Finance Act 1985 Sch. 26, para. 2(4),in relation to events occurring after 18March 1985.

F98S. 31(4FA) inserted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 5(1)(2)

F99S. 31(4FB) inserted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 6(1)(2)

F100Finance Act 1986 Sch. 19, para. 8(2),in relation to transfers of value made on or after 18March 1986.

F101Words in s. 31(4G)(b) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the substituting Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 8(2) (with ss. 60, 101(1), 201(3)).

F102S. 31(5) substituted (31.7.1998 with effect in relation to the making of any designation on a claim made on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 4(3)(4)

Modifications etc. (not altering text)

C14 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

32 Chargeable events. E+W+S+N.I.

(1)Where there has been a conditionally exempt transfer of any property, tax shall be charged under this section on the first occurrence after the transfer [F103(or, if the transfer was a potentially exempt transfer, after the death of the transferor)] of an event which under this section is a chargeable event with respect to the property.

(2)If the Treasury are satisfied that at any time an undertaking given with respect to the property under section 30 above or [F104subsection (5AA)] below has not been observed in a material respect, the failure to observe the undertaking is a chargeable event with respect to the property.

(3)If—

(a)the person beneficially entitled to the property dies, or

(b)the property is disposed of, whether by sale or gift or otherwise,

the death or disposal is, subject to subsections (4) and (5) below, a chargeable event with respect to the property.

(4)A death or disposal is not a chargeable event with respect to any property if the personal representatives of the deceased (or, in the case of settled property, the trustees or the person next entitled) within three years of the death make or, as the case may be, the disposal is—

(a)a disposal of the property by sale by private treaty to a body mentioned in Schedule 3 to this Act, or a disposal of it to such a body otherwise than by sale, or

(b)a disposal in pursuance of section 230 below,

and a death or disposal of the property after such a disposal as is mentioned in paragraph (a) or (b) above is not a chargeable event with respect to the property unless there has again been a conditionally exempt transfer of it after that disposal.

(5)A death or disposal otherwise than by sale is not a chargeable event with respect to any property if—

(a)the transfer of value made on the death or the disposal is itself a conditionally exempt transfer of the property, or

[F105(b)the condition specified in subsection (5AA) below is satisfied with respect to the property.]

[F106(5AA)The condition referred to in subsection (5)(b) above is satisfied if—

(a)the requisite undertaking described in section 31 above is given with respect to the property by such person as the Board think appropriate in the circumstances of the case, or

(b)(where the property is an area of land within section 31(1)(d) above) the requisite undertakings described in that section are given with respect to the property by such person or persons as the Board think appropriate in the circumstances of the case.]

[F107(5A)This section does not apply where section 32A below applies.]

(6)(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F108

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Amendments (Textual)

F103Finance Act 1986 Sch. 19, para. 9,in relation to transfers on or after 18March 1986.

F104Words in s. 32(2) substituted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(1)(9)

F105S. 32(5)(b) substituted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(2)(9)

F106S. 32(5AA) inserted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(3)(9)

F107Finance Act 1985 Sch. 26, para. 3(2),in relation to events occurring after 18March 1985.

F108 Subss. (6)and (7)repealed by Finance Act 1985 s. 94; Sch. 26, para. 3(3)and Sch. 27, Part XI,in relation to events occurring after 18March 1985.

Modifications etc. (not altering text)

C15 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

[F10932A Associated properties. E+W+S+N.I.

(1)For the purposes of this section the following properties are associated with each other, namely, a building falling within section 31(1)(c) above and (to the extent that any of the following exists) an area or areas of land falling within section 31(1)(d) above in relation to the building and an object or objects falling within section 31(1)(e) above in relation to the building; and this section applies where there are such properties, which are referred to as associated properties.

(2)Where there has been a conditionally exempt transfer of any property (or part), tax shall be charged under this section in respect of that property (or part) on the first occurrence after the transfer [F110(or, if the transfer was a potentially exempt transfer, after the death of the transferor] of an event which under this section is a chargeable event with respect to that property (or part).

(3)If the Treasury are satisfied that at any time an undertaking given under section 30 above or this section for the maintenance, repair, preservation, access or keeping of any of the associated properties has not been observed in a material respect, then (subject to subsection (10) below) the failure to observe the undertaking is a chargeable event with respect to the whole of each of the associated properties of which there has been a conditionally exempt transfer.

(4)If—

(a)the person beneficially entitled to property dies, or

(b)property (or part of it) is disposed of, whether by sale or gift or otherwise,

then, if the property is one of the associated properties and an undertaking for its maintenance, repair, preservation, access or keeping has been given under section 30 above or this section, the death or disposal is (subject to subsections (5) to (10) below) a chargeable event with respect to the whole of each of the associated properties of which there has been a conditionally exempt transfer.

(5)Subject to subsection (6) below, the death of a person beneficially entitled to property, or the disposal of property (or part), is not a chargeable event if the personal representatives of the deceased (or, in the case of settled property, the trustees or the person next entitled) within three years of the death make or, as the case may be, the disposal is—

(a)a disposal of the property (or part) concerned by sale by private treaty to a body mentioned in Schedule 3 to this Act, or to such a body otherwise than by sale, or

(b)a disposal of the property (or part) concerned in pursuance of section 230 below.

(6)Where a disposal mentioned in subsection (5)(a) or (b) above is a part disposal, that subsection does not make the event non-chargeable with respect to property other than that disposed of [F111unless—

(a)the requisite undertaking described in section 31 above is given with respect to the property (or part) not disposed of by such person as the Board think appropriate in the circumstances of the case, or

(b)(where any of the property or part not disposed of is an area of land within section 31(1)(d) above) the requisite undertakings described in that section are given with respect to that property (or that part) by such person or persons as the Board think appropriate in the circumstances of the case;

and] in this subsection “part disposal” means a disposal of property which does not consist of or include the whole of each property which is one of the associated properties and of which there has been a conditionally exempt transfer.

(7)Where, after a relevant disposal (that is, a disposal mentioned in subsection (5)(a) or (b) above made in circumstances where that subsection applies), a person beneficially entitled to the property (or part) concerned dies or the property (or part) concerned is disposed of, the death or disposal is not a chargeable event with respect to the property (or part) concerned unless there has again been a conditionally exempt transfer of the property (or part) concerned after the relevant disposal.

(8)The death of a person beneficially entitled to property, or the disposal of property (or part) otherwise than by sale, is not a chargeable event if—

(a)the transfer of value made on the death or the disposal is itself a conditionally exempt transfer of the property (or part) concerned, or

[F112(b)the condition specified in subsection (8A) below is satisfied with respect to the property (or part) concerned.]

[F113(8A)The condition referred to in subsection (8)(b) above is satisfied if—

(a)the requisite undertaking described in section 31 above is given with respect to the property (or part) by such person as the Board think appropriate in the circumstances of the case, or

(b)(where any of the property or part is an area of land within section 31(1)(d) above) the requisite undertakings described in that section are given with respect to the property (or part) by such person or persons as the Board think appropriate in the circumstances of the case.]

[F114(9)If the whole or part of any property is disposed of by sale and—

(a)the requisite undertaking described in section 31 above is given with respect to the property (or part) by such person as the Board think appropriate in the circumstances of the case, or

(b)(where any of the property or part is an area of land within section 31(1)(d) above) the requisite undertakings described in that section are given with respect to the property (or part) by such person or persons as the Board think appropriate in the circumstances of the case,

the disposal is a chargeable event only with respect to the whole or part actually disposed of (if it is a chargeable event with respect to such whole or part apart from this subsection).]

(10)If—

(a)the Treasury are satisfied that there has been a failure to observe, as to one of the associated properties or part of it, an undertaking for the property’s maintenance, repair, preservation, access or keeping, or

(b)there is a disposal of one of the associated properties or part of it,

and it appears to the Treasury that the entity consisting of the associated properties has not been materially affected by the failure or disposal, they may direct that it shall be a chargeable event only with respect to the property or part as to which there has been a failure or disposal (if it is a chargeable event with respect to that property or part apart from this subsection.]

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Amendments (Textual)

F109Finance Act 1985 Sch. 26 para. 4,in relation to events occurring after 18March 1985.

F110Finance Act 1986 Sch. 19, para. 10,in relation to transfers on or after 18March 1986.

F111S. 32A(6)(a)(b) and the words “unless”and “and”substituted for the words “unless”to “case; and”(31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(4)(9)

F112S. 32A(8)(b) substituted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(5)(9)

F113S. 32A(8A) inserted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(6)(9)

F114S. 32A(9) substituted (31.7.1998 with effect in relation to the giving of any undertaking on or after 31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 7(7)(9)

Modifications etc. (not altering text)

C16 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

33 Amount of charge under section 32.E+W+S+N.I.

(1)Tax chargeable in respect of any property under section 32 [F115or 32A] above by reference to a chargeable event shall be charged—

(a)on an amount equal to the value of the property at the time of the chargeable event; and

(b)at the following rate or rates—

(i)if the relevant person is alive, the rate or rates that would be applicable to that amount [F116in accordance with section 7(2) above] if it were the value transferred by a chargeable transfer made by the relevant person at that time;

(ii)if the relevant person is dead, the rate or rates that would have applied to that amount [F117in accordance with the appropriate provision of section 7 above] if it had been added to the value transferred on his death and had formed the highest part of that value.

[F118(2)For the purposes of subsection (1)(b)(ii) above the appropriate provision of section 7 above is—

(a)if the conditionally exempt transfer by the relevant person was made on death (but the property was not treated as forming part of his estate immediately before his death only by virtue of section 102(3) of the Finance Act 1986), subsection (1) of section 7; and

(b)in any other case, subsection (2) of section 7.

(2A)The rate or rates of tax determined under subsection (1)(b)(i) above in respect of any chargeable event shall not be affected by the death of the relevant person after that event.]

(3)Where the chargeable event is a disposal on sale and the sale—

(a)was not intended to confer any gratuitous benefit on any person, and

(b)was either a transaction at arm’s length between persons not connected with each other or a transaction such as might be expected to be made at arm’s length between persons not connected with each other,

the value of the property at the time of the chargeable event shall be taken for the purposes of subsection (1)(a) above to be equal to the proceeds of the sale.

(4)Where by virtue of section 30(4) above the conditionally exempt transfer extended only to part of the property, the amount mentioned in subsection (1)(a) above shall be proportionately reduced.

(5)The relevant person in relation to a chargeable event in respect of any property is—

(a)if there has been only one conditionally exempt transfer of the property before the event, the person who made that transfer;

(b)if there have been two or more such transfers and the last was before, or only one of them was within, the period of thirty years ending with the event, the person who made the last of those transfers;

(c)if there have been two or more such transfers within that period, the person who made whichever of those transfers the Board may select.

(6)The conditionally exempt transfers to be taken into account for the purpose of subsection (5) above in relation to a chargeable event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 32(4) above would have been such a chargeable event [F119or, where the property has been disposed of as mentioned in section 32A(5) above, before any event which apart from section 32A(5) would have been such a chargeable event]

(7)[F120Subject to subsection (8) below], where after a conditionally exempt transfer of any property there is a chargeable transfer the value transferred by which is wholly or partly attributable to that property, any tax charged on that value so far as attributable to that property shall be allowed as a credit—

(a)if the chargeable transfer is a chargeable event with respect to the property, against the tax chargeable in accordance with this section by reference to that event;

(b)if the chargeable transfer is not such a chargeable event, against the tax chargeable in accordance with this section by reference to the next chargeable event with respect to the property.

[F121(8)Where after a conditionally exempt transfer of any property there is a potentially exempt transfer the value transferred by which is wholly or partly attributable to that property and either—

(a)the potentially exempt transfer is a chargeable event with respect to the property, or

(b)after the potentially exempt transfer, but before the death of the person who is the transferor in relation to the potentially exempt transfer, a chargeable event occurs with respect to the property,

the tax charged in accordance with this section by reference to that chargeable event shall be allowed as a credit against any tax which may become chargeable, by reason of the potentially exempt transfer proving to be a chargeable transfer, on so much of the value transferred by that transfer as is attributable to the property; and subsection (7) above shall not apply with respect to any tax so becoming chargeable.]

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Amendments (Textual)

F115Finance Act 1985 Sch. 26 para. 5,in relation to events occurring after 18March 1985.

F116Finance Act 1986 Sch. 19 para. 11(1)(a),with effect from 18March 1986.Originally

“under the second Table in Schedule 1 to this Act”.

F117Finance Act 1986 Sch. 19 para. 11(1)(b),with effect from 18March 1986.Originally

“under the appropriate Table”.

F118Finance Act 1986 Sch. 19 para. 11(2),with effect from 18March 1986.Originally

“(2) For the purposes of subsection (1)(b)(ii) above the appropriate Table is, if the conditionally exempt transfer by the relevant person was made on death, the first Table in Schedule 1 to this Act and, if not, the second Table”.

F119Finance Act 1985 Sch. 26 para. 6,in relation to events occurring after 18March 1985.

F120Finance Act 1986 Sch. 19 para. 11(3),with effect from 18March 1986.

F121Finance Act 1986 Sch. 19 para. 11(4),in relation to chargeable events in respect of potentially exempt transfers made on or after 18March 1986.

34 Reinstatement of transferor’s cumulative total.E+W+S+N.I.

(1)Where tax has become chargeable under section 32 [F122or 32A] above by reference to a chargeable event in respect of any property (“the relevant event”) the rate or rates of tax applicable to any subsequent chargeable transfer made by the person who made the last conditionally exempt transfer of the property before the relevant event shall be determined as if the amount on which tax has become chargeable as aforesaid were value transferred by a chargeable transfer made by him at the time of the relevant event.

(2)Where the person who made the last conditionally exempt transfer of the property before the relevant event—

(a)is dead, and

(b)is for the purposes of section 33 above the relevant person in relation to a subsequent chargeable event,

section 33(1)(b)(ii) shall have effect as if the value transferred on his death were increased by the amount on which tax has become chargeable on the occasion of the relevant event.

(3)If—

(a)the person who made the last conditionally exempt transfer of the property before the relevant event is not the relevant person for the purposes of section 33 above in relation to that event, and

(b)at the time of that event or within the previous five years the property is or has been comprised in a settlement made not more than thirty years before that event, and

(c)a person who is the settlor in relation to the settlement has made a conditionally exempt transfer of the property within those thirty years,

subsections (1) and (2) above shall have effect with the substitution for references to the person who made the last conditionally exempt transfer before the relevant event of a reference to any such person as is mentioned in paragraph (c) above.

(4)The conditionally exempt transfers to be taken into account for the purposes of subsection (3)(c) above in relation to the relevant event do not include transfers made before any previous chargeable event in respect of the same property or before any event which apart from section 32(4) above would have been such a chargeable event [F123or, where the property has been disposed of as mentioned in section 32A(5) above, before any event which apart from section 32A(5) would have been such a chargeable event].

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Amendments (Textual)

F122Finance Act 1985 Sch. 26 para. 5,in relation to events occurring after 18March 1985.

F123Finance Act 1985 Sch. 26 para. 6,in relation to events occurring after 18March 1985.

35 Conditional exemption on death before 7th April 1976.E+W+S+N.I.

(1)Schedule 5 to this Act shall have effect with respect to certain cases where, by virtue of sections 31 to 34 of the M9Finance Act 1975, the value of any property was left out of account in determining the value transferred on a death before 7th April 1976.

(2)Where there has been a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the Finance Act 1975 and, before any tax has become chargeable in respect of that property under those provisions, there is a conditionally exempt transfer of that property, then, on the occurrence of a chargeable event in respect of that property—

[F124(a)if there has been no conditionally exempt transfer of the property on death, tax shall be chargeable either—

(i)under section 32 or 32A above (as the case may be), or

(ii)under Schedule 5 to this Act, as the Board may elect;

(b)if there has been such a conditionally exempt transfer, tax shall be chargeable under section 32 or 32A above (as the case may be) and not under that Schedule.]

(3)In [F125sections 33(7) and (8) above, references] to a conditionally exempt transfer of any property [F126include references] to a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the Finance Act 1975 and, in relation to such property, references to a chargeable event or to the tax chargeable in accordance with section 33 above by reference to a chargeable event include references to an event on the occurrence of which tax becomes chargeable under Schedule 5 to this Act, or to the tax so chargeable.

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F124Finance Act 1985 Sch. 26 para. 7,in relation to events occurring after 18March 1985.Originally

“(a) if there has been no conditionally exempt transfer of the property on death, tax shall be chargeable either under section 32 above or under Schedule 5 to this Act as the Board may elect; (b) if there has been such a conditionally exempt transfer, tax shall be chargeable under that section and not under that Schedule.”

F125Finance Act 1986 Sch. 19 para. 12,with effect from 18March 1986.Originally

“section 33(7) above, the reference”.

F126Finance Act 1986 Sch. 19 para. 12,with effect from 18March 1986.Originally

“includes a reference”.

Marginal Citations

[F12735A Variation of undertakings.E+W+S+N.I.

(1)An undertaking given under section 30, 32 or 32A above or paragraph 5 of Schedule 5 to this Act may be varied from time to time by agreement between the Board and the person bound by the undertaking.

(2)Where a Special Commissioner is satisfied that—

(a)the Board have made a proposal for the variation of such an undertaking to the person bound by the undertaking,

(b)that person has failed to agree to the proposed variation within six months after the date on which the proposal was made, and

(c)it is just and reasonable, in all the circumstances, to require the proposed variation to be made,

the Commissioner may direct that the undertaking is to have effect from a date specified by him as if the proposed variation had been agreed to by the person bound by the undertaking.

(3)The date specified by the Special Commissioner must not be less than sixty days after the date of his direction.

(4)A direction under this section shall not take effect if, before the date specified by the Special Commissioner, a variation different from that to which the direction relates is agreed between the Board and the person bound by the undertaking.]

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Amendments (Textual)

F127S. 35A and sidenote inserted (31.7.1998 with effect as mentioned in Sch. 25 para. 8(4) of the amending Act) by 1998 c. 36, s. 142, Sch. 25 para. 8(1)

Modifications etc. (not altering text)

C17S. 35A extended (31.7.1998) by 1992 c. 12, s. 258(8A) (as inserted (31.7.1998 with effect as mentioned in Sch. 25 para. 9(2) of the amending Act) by 1998 c. 36, s. 142, Sch. 25 para. 9(1))

S. 35A applied (with modifications) (31.7.1998) by 1998 c. 36, s. 142, Sch. 25 para. 10

CHAPTER IIIE+W+S+N.I. ALLOCATION OF EXEMPTIONS

36 Preliminary.E+W+S+N.I.

Where any one or more of sections 18, 23 to 27 and 30 above apply in relation to a transfer of value but the transfer is not wholly exempt—

(a)any question as to the extent to which it is exempt or, where it is exempt up to a limit, how an excess over the limit is to be attributed to the gifts concerned shall be determined in accordance with sections 37 to 40 below; and

(b)section 41 below shall have effect as respects the burden of tax.

37 Abatement of gifts.E+W+S+N.I.

(1)Where a gift would be abated owing to an insufficiency of assets and without regard to any tax chargeable, the gift shall be treated for the purposes of the following provisions of this Chapter as so abated.

(2)Where the value attributable, in accordance with section 38 below, to specific gifts exceeds the value transferred the gifts shall be treated as reduced to the extent necessary to reduce their value to that of the value transferred; and the reduction shall be made in the order in which, under the terms of the relevant disposition or any rule of law, it would fall to be made on a distribution of assets.

38 Attribution of value to specific gifts.E+W+S+N.I.

(1)Such part of the value transferred shall be attributable to specific gifts as corresponds to the value of the gifts; but if or to the extent that the gifts—

(a)are not gifts with respect to which the transfer is exempt or are outside the limit up to which the transfer is exempt, and

(b)do not bear their own tax,

the amount corresponding to the value of the gifts shall be taken to be the amount arrived at in accordance with subsections (3) to (5) below.

(2)Where any question arises as to which of two or more specific gifts are outside the limit up to which a transfer is exempt or as to the extent to which a specific gift is outside that limit—

(a)the excess shall be attributed to gifts not bearing their own tax before being attributed to gifts bearing their own tax, and

(b)subject to paragraph (a) above, the excess shall be attributed to gifts in proportion to their values.

(3)Where the only gifts with respect to which the transfer is or might be chargeable are specific gifts which do not bear their own tax, the amount referred to in subsection (1) above is the aggregate of—

(a)the sum of the value of those gifts; and

(b)the amount of tax which would be chargeable if the value transferred equalled that aggregate.

(4)Where the specific gifts not bearing their own tax are not the only gifts with respect to which the transfer is or might be chargeable, the amount referred to in subsection (1) above is such amount as, after deduction of tax at the assumed rate specified in subsection (5) below, would be equal to the sum of the value of those gifts.

(5)For the purposes of subsection (4) above—

(a)the assumed rate is the rate found by dividing the assumed amount of tax by that part of the value transferred with respect to which the transfer would be chargeable on the hypothesis that—

(i)the amount corresponding to the value of specific gifts not bearing their own tax is equal to the aggregate referred to in subsection (3) above, and

(ii)the parts of the value transferred attributable to specific gifts and to gifts of residue or shares in residue are determined accordingly; and

(b)the assumed amount of tax is the amount that would be charged on the value transferred on the hypothesis mentioned in paragraph (a) above.

(6)For the purposes of this section, any liability of the transferor which is not to be taken into account under section 5(5) above [F128or by virtue of section 103 of the Finance Act 1986] shall be treated as a specific gift [F128and to the extent that any liability of the transferor is abated under the said section 103, that liability shall be treated as a specific gift].

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Amendments (Textual)

F128Finance Act 1986 Sch. 19 para. 13,with effect from 18March 1986.

39 Attribution of value to residuary gifts.E+W+S+N.I.

Such part only of the value transferred shall be attributed to gifts of residue or shares in residue as is not attributed under section 38 above to specific gifts.

[F12939A Operation of sections 38 and 39 in cases of business or agricultural relief.E+W+S+N.I.

(1)Where any part of the value transferred by a transfer of value is attributable to—

(a)the value of relevant business property, or

(b)the agricultural value of agricultural property,

then, for the purpose of attributing the value transferred (as reduced in accordance with section 104 or 116 below), to specific gifts and gifts of residue or shares of residue, sections 38 and 39 above shall have effect subject to the following provisions of this section.

(2)The value of any specific gifts of relevant business property or agricultural property shall be taken to be their value as reduced in accordance with section 104 or 116 below.

(3)The value of any specific gifts not falling within subsection (2) above shall be taken to be the appropriate fraction of their value.

(4)In subsection (3) above “the appropriate fraction” means a fraction of which—

(a)the numerator is the difference between the value transferred and the value, reduced as mentioned in subsection (2) above, of any gifts falling within that subsection, and

(b)the denominator is the difference between the unreduced value transferred and the value, before the reduction mentioned in subsection (2) above, of any gifts falling within that subsection;

and in paragraph (b) above “the unreduced value transferred” means the amount which would be the value transferred by the transfer but for the reduction required by sections 104 and 116 below.

(5)If or to the extent that specific gifts fall within paragraphs (a) and (b) of subsection (1) of section 38 above, the amount corresponding to the value of the gifts shall be arrived at in accordance with subsections (3) to (5) of that section by reference to their value reduced as mentioned in subsection (2) or, as the case may be, subsection (3) of this section.

(6)For the purposes of this section the value of a specific gift of relevant business property or agricultural property does not include the value of any other gift payable out of that property; and that other gift shall not itself be treated as a specific gift of relevant business property or agricultural property.

(7)In this section—

  • agricultural property” and “the agricultural value of agricultural property” have the same meaning as in Chapter II of Part V of this Act; and

  • relevant business property” has the same meaning as in Chapter I of that Part.]

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Amendments (Textual)

F129Finance Act 1986 s. 105,in relation to transfers of value made after 17March 1986.

40 Gifts made separately out of different funds.E+W+S+N.I.

Where gifts taking effect on a transfer of value take effect separately out of different funds the preceding provisions of this Chapter shall be applied separately to the gifts taking effect out of each of those funds, with the necessary adjustments of the values and amounts referred to in those provisions.

41 Burden of tax.E+W+S+N.I.

Notwithstanding the terms of any disposition—

(a)none of the tax on the value transferred shall fall on any specific gift if or to the extent that the transfer is exempt with respect to the gift, and

(b)none of the tax attributable to the value of the property comprised in residue shall fall on any gift of a share of residue if or to the extent that the transfer is exempt with respect to the gift.

42 Supplementary.E+W+S+N.I.

(1)In this Chapter—

  • gift”, in relation to any transfer of value, means the benefit of any disposition or rule of law by which, on the making of the transfer, any property becomes (or would but for any abatement become) the property of any person or applicable for any purpose;

  • given” shall be construed accordingly;

  • specific gift” means any gift other than a gift of residue or of a share in residue.

(2)For the purposes of this Chapter a gift bears its own tax if the tax attributable to it falls on the person who becomes entitled to the property given or (as the case may be) is payable out of property applicable for the purposes for which the property given becomes applicable.

(3)Where—

(a)the whole or part of the value transferred by a transfer of value is attributable to property which is the subject of two or more gifts, and

(b)the aggregate of the values of the property given by each of those gifts is less than the value transferred or, as the case may be, that part of it,

then for the purposes of this Chapter (and notwithstanding the definition of a gift in subsection (1) above) the value of each gift shall be taken to be the relevant proportion of the value transferred or, as the case may be, that part of it; and the relevant proportion in relation to any gift is the proportion which the value of the property given by it bears to the said aggregate.

(4)Where on the death of a person legal rights under the law of Scotland are claimed by a person entitled to claim them, they shall be treated for the purposes of this Chapter as a specific gift which bears its own tax; and in determining the value of such legal rights, any tax payable on the estate of the deceased shall be left out of account.

PART IIIE+W+S+N.I. SETTLED PROPERTY

CHAPTER IE+W+S+N.I. PRELIMINARY

43 Settlement and related expressions.E+W+S+N.I.

(1)The following provisions of this section apply for determining what is to be taken for the purposes of this Act to be a settlement, and what property is, accordingly, referred to as property comprised in a settlement or as settled property.

(2)Settlement” means any disposition or dispositions of property, whether effected by instrument, by parol or by operation of law, or partly in one way and partly in another, whereby the property is for the time being—

(a)held in trust for persons in succession or for any person subject to a contingency, or

(b)held by trustees on trust to accumulate the whole or part of any income of the property or with power to make payments out of that income at the discretion of the trustees or some other person, with or without power to accumulate surplus income, or

(c)charged or burdened (otherwise than for full consideration in money or money’s worth paid for his own use or benefit to the person making the disposition) with the payment of any annuity or other periodical payment payable for a life or any other limited or terminable period,

or would be so held or charged or burdened if the disposition or dispositions were regulated by the law of any part of the United Kingdom; or whereby, under the law of any other country, the administration of the property is for the time being governed by provisions equivalent in effect to those which would apply if the property were so held, charged or burdened.

(3)A lease of property which is for life or lives, or for a period ascertainable only by reference to a death, or which is terminable on, or at a date ascertainable only by reference to, a death, shall be treated as a settlement and the property as settled property, unless the lease was granted for full consideration in money or money’s worth; and where a lease not granted as a lease at a rack rent is at any time to become a lease at an increased rent it shall be treated as terminable at that time.

(4)In relation to Scotland “settlement” also includes—

(a)an entail,

(b)any deed by virtue of which an annuity is charged on, or on the rents of, any property (the property being treated as the property comprised in the settlement), and

(c)any deed creating or reserving a proper liferent of any property whether heritable or moveable (the property from time to time subject to the proper liferent being treated as the property comprised in the settlement);

and for the purposes of this subsection “deed” includes any disposition, arrangement, contract, resolution, instrument or writing.

(5)In the application of this Act to Northern Ireland this section shall have effect as if references to property held in trust for persons included references to property standing limited to persons and as if the lease referred to in subsection (3) did not include a lease in perpetuity within the meaning of section 1 of the M10Renewable Leasehold Conversion Act 1849 or a lease to which section 37 of that Act applies.

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Marginal Citations

44 Settlor.E+W+S+N.I.

(1)In this Act “settlor”, in relation to a settlement, includes any person by whom the settlement was made directly or indirectly, and in particular (but without prejudice to the generality of the preceding words) includes any person who has provided funds directly or indirectly for the purpose of or in connection with the settlement or has made with any other person a reciprocal arrangement for that other person to make the settlement.

(2)Where more than one person is a settlor in relation to a settlement and the circumstances so require, this Part of this Act (except section 48(4) to (6)) shall have effect in relation to it as if the settled property were comprised in separate settlements.

45 Trustee.E+W+S+N.I.

In this Act “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this section, means any person in whom the settled property or its management is for the time being vested.

46 Interest in possession: Scotland.E+W+S+N.I.

In the application of this Act to Scotland, any reference to an interest in possession in settled property is a reference to an interest of any kind under a settlement by virtue of which the person in right of that interest is entitled to the enjoyment of the property or would be so entitled if the property were capable of enjoyment, including an interest of an assignee under an assignation of an interest of any kind (other than a reversionary interest) in property subject to a proper liferent; and the person in right of such an interest at any time shall be deemed to be entitled to a corresponding interest in the whole or any part of the property comprised in the settlement.

[F13046AContract of life insurance entered into before 22nd March 2006 which on that day is settled property in which interest in possession subsistsE+W+S+N.I.

(1)Subsections (2) and (4) below apply where—

(a)a settlement commenced before 22nd March 2006,

(b)a contract of life insurance was entered into before that day,

(c)a premium payable under the contract is paid, or an allowed variation is made to the contract, at a particular time on or after that day,

(d)immediately before that day, and at all subsequent times up to the particular time, there were rights under the contract that—

(i)were comprised in the settlement, and

(ii)were settled property in which a transitionally-protected interest (whether or not the same such interest throughout that period) subsisted,

(e)rights under the contract become, by reference to payment of the premium or as a result of the variation,—

(i)comprised in the settlement, and

(ii)part of the settled property in which the then-current transitionally-protected interest subsists, and

(f)any variation of the contract on or after 22nd March 2006 but before the particular time, so far as it is a variation that—

(i)increased the benefits secured by the contract, or

(ii)extended the term of the insurance provided by the contract,

was an allowed variation.

(2)For the purposes of the provisions mentioned in subsection (3) below—

(a)the rights mentioned in subsection (1)(e) above shall be taken to have become comprised in the settlement, and

(b)the person beneficially entitled to the then-current transitionally-protected interest shall be taken to have become beneficially entitled to his interest in possession so far as it subsists in those rights,

before 22nd March 2006.

(3)Those provisions are—

  • section 3A(2) above;

  • section 5(1A) above;

  • section 49(1A) and (1B) below;

  • section 51(1A) and (1B) below;

  • section 52(2A) and (3A) below;

  • section 53(1A) and (2A) below;

  • section 54(2A) and (2B) below;

  • section 54A(1A) below;

  • section 57A(1A) below;

  • section 58(1B) and (1C) below;

  • section 59(1) and (2) below;

  • section 80(4) below;

  • section 100(1A) below;

  • section 101(1A) below;

  • section 102ZA(1) of the Finance Act 1986 (gifts with reservation); and

  • sections 72(1A) and (2A) and 73(2A) of the 1992 Act.

(4)If payment of the premium is a transfer of value made by an individual, that transfer of value is a potentially exempt transfer.

(5)In this section—

  • allowed variation”, in relation to a contract, means a variation that takes place by operation of, or as a result of exercise of rights conferred by, provisions forming part of the contract immediately before 22nd March 2006;

  • transitionally-protected interest” means—

    (a)

    an interest in possession to which a person was beneficially entitled immediately before, and on, 22nd March 2006, or

    (b)

    a transitional serial interest.

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Amendments (Textual)

46BContract of life insurance entered into before 22nd March 2006 which immediately before that day is property to which section 71 appliesE+W+S+N.I.

(1)Subsections (2) and (5) below apply where—

(a)a settlement commenced before 22nd March 2006,

(b)a contract of life insurance was entered into before that day,

(c)a premium payable under the contract is paid, or an allowed variation is made to the contract, at a particular time on or after that day,

(d)immediately before that day, and at all subsequent times up to the particular time, there were rights under the contract that—

(i)were comprised in the settlement, and

(ii)were settled property to which section 71 below applied,

(e)rights under the contract become, by reference to payment of the premium or as a result of the variation, comprised in the settlement, and

(f)any variation of the contract on or after 22nd March 2006 but before the particular time, so far as it was a variation that—

(i)increased the benefits secured by the contract, or

(ii)extended the term of the insurance provided by the contract,

was an allowed variation.

(2)If the rights mentioned in subsection (1)(e) above would, but for subsection (1A) of section 71 below, become property to which that section applies, those rights shall become settled property to which that section applies when they become comprised in the settlement.

(3)Subsection (5) below also applies where—

(a)a settlement commenced before 22nd March 2006,

(b)a contract of life insurance was entered into before that day,

(c)a premium payable under the contract is paid, or an allowed variation is made to the contract, at a particular time on or after that day when there are rights under the contract—

(i)that are comprised in the settlement and are settled property to which section 71A or 71D below applies,

(ii)that immediately before that day were settled property to which section 71 below applied, and

(iii)that on or after that day, but before the particular time, became property to which section 71A or 71D below applies in circumstances falling within subsection (4) below,

(d)rights under the contract become, by reference to payment of the premium or as a result of the variation, comprised in the settlement, and

(e)any variation of the contract on or after 22nd March 2006 but before the particular time, so far as it was a variation that—

(i)increased the benefits secured by the contract, or

(ii)extended the term of the insurance provided by the contract,

was an allowed variation.

(4)The circumstances referred to in subsection (3)(c)(iii) above are—

(a)in the case of property to which section 71D below applies, that the property on becoming property to which section 71D below applies ceased to be property to which section 71 below applied without ceasing to be settled property;

(b)in the case of property to which section 71A below applies—

(i)that the property on becoming property to which section 71A below applies ceased, by the operation of section 71(1B) below, to be property to which section 71 below applied, or

(ii)that the property, having become property to which section 71D below applied in circumstances falling within paragraph (a) above, on becoming property to which 71A below applies ceased, by the operation of section 71D(5)(a) below, to be property to which section 71D below applied.

(5)If payment of the premium is a transfer of value made by an individual, that transfer of value is a potentially exempt transfer.

(6)In this section “allowed variation”, in relation to a contract, means a variation that takes place by operation of, or as a result of exercise of rights conferred by, provisions forming part of the contract immediately before 22nd March 2006.]

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Amendments (Textual)

[F13147A Settlement powerE+W+S+N.I.

In this Act “settlement power” means any power over, or exercisable (whether directly or indirectly) in relation to, settled property or a settlement.]

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Amendments (Textual)

F131S. 47A inserted (24.7.2002 with effect as mentioned in s.119(6)(7) of the amending Act) by 2002 c. 23, s. 119(2)(6)(7)

47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48 Excluded property.E+W+S+N.I.

(1)A reversionary interest is excluded property unless—

(a)it has at any time been acquired (whether by the person entitled to it or by a person previously entitled to it) for a consideration in money or money’s worth, or

(b)it is one to which either the settlor or his spouse [F132or civil partner] is or has been beneficially entitled, or

(c)it is the interest expectant on the determination of a lease treated as a settlement by virtue of section 43(3) above.

(2)In relation to a reversionary interest under a settlement made before 16th April 1976, subsection (1) above shall have effect with the omission of paragraph (b); and, if the person entitled to a reversionary interest under a settlement made on or after 16th April 1976 acquired the interest before 10th March 1981, that subsection shall have effect with the omission of the words “or has been” in paragraph (b).

(3)Where property comprised in a settlement is situated outside the United Kingdom—

(a)the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the settlement was made, and

(b)section 6(1) above applies to a reversionary interest in the property but does not otherwise apply in relation to the property

[F133; but this subsection is subject to subsection (3B) below.]

[F134(3A)Where property comprised in a settlement is a holding in an authorised unit trust or a share in an open-ended investment company—

(a)the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the settlement was made, and

(b)section 6(1A) above applies to a reversionary interest in the property but does not otherwise apply in relation to the property

[F135; but this subsection is subject to subsection (3B) below.]]

[F136(3B)Property is not excluded property by virtue of subsection (3) or (3A) above if—

(a)a person is, or has been, beneficially entitled to an interest in possession in the property at any time,

(b)the person is, or was, at that time an individual domiciled in the United Kingdom, and

(c)the entitlement arose directly or indirectly as a result of a disposition made on or after 5th December 2005 for a consideration in money or money's worth.

(3C)For the purposes of subsection (3B) above—

(a)it is immaterial whether the consideration was given by the person or by anyone else, and

(b)the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy.]

(4)Where securities issued by the Treasury subject to a condition of the kind mentioned in subsection (2) of section 6 above are comprised in a settlement, that subsection shall not apply to them; but the securities are excluded property if—

(a)a person [F137of a description specified in the condition in question] is entitled to a qualifying interest in possession in them, or

(b)no qualifying interest in possession subsists in them but it is shown that all known persons for whose benefit the settled property or income from it has been or might be applied, or who are or might become beneficially entitled to an interest in possession in it, are persons [F137of a description specified in the condition in question].

(5)Where—

(a)property ceased to be comprised in one settlement before 10th December 1981 and after 19th April 1978 and, by the same disposition, became comprised in another settlement, or

(b)property ceased to be comprised in one settlement after 9th December 1981 and became comprised in another without any person having in the meantime become beneficially entitled to the property (and not merely to an interest in possession in the property),

subsection (4)(b) above shall, in its application to the second settlement, be construed as requiring the matters there stated to be shown both in relation to the property comprised in that settlement and in relation to the property that was comprised in the first settlement.

(6)Subsection (5) above shall not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the second settlement before 10th December 1981.

(7)In this section “qualifying interest in possession” has the same meaning as in Chapter III of this Part of this Act.

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Amendments (Textual)

F133Words in s. 48(3) inserted (5.12.2005) by Finance Act 2006 (c. 25), s. 157(2)(6) (with s. 157(5))

F134S. 48(3A) inserted (with effect as mentioned in s. 186(8) of the amending Act) by Finance Act 2003 (c. 14), s. 186(3)

F135Words in s. 48(3A) inserted (5.12.2005) by Finance Act 2006 (c. 25), s. 157(3)(6) (with s. 157(5))

F137Words in s. 48(4)(a)(b) substituted (29.4.1996 with effect as mentioned in s. 154(9)(a)(b) of the amending Act) by 1996 c. 8, s. 154(7), Sch. 28 para. 8 (with s. 154(5))

CHAPTER IIE+W+S+N.I.[F138 INTERESTS IN POSSESSION, REVERSIONARY INTERESTS AND SETTLEMENT POWERS]

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Amendments (Textual)

F138Words in the title of Chapter II substituted (24.7.2002 with effect in relation to transfers of value on or after 17.4.2002) by virtue of 2002 c. 23, s. 119(5)(6)

49 Treatment of interests in possession.E+W+S+N.I.

(1)A person beneficially entitled to an interest in possession in settled property shall be treated for the purposes of this Act as beneficially entitled to the property in which the interest subsists.

[F139(1A)Where the interest in possession mentioned in subsection (1) above is one to which the person becomes beneficially entitled on or after 22nd March 2006, subsection (1) above applies in relation to that interest only if, and for so long as, it is—

(a)an immediate post-death interest,

(b)a disabled person's interest, or

(c)a transitional serial interest.

(1B)Where the interest in possession mentioned in subsection (1) above is one to which the person became beneficially entitled before 22nd March, subsection (1) above does not apply in relation to that interest at any time when section 71A below applies to the property in which the interest subsists.]

(2)Where a person becomes entitled to an interest in possession in settled property as a result of a disposition for a consideration in money or money’s worth, any question whether and to what extent the giving of the consideration is a transfer of value or chargeable transfer shall be determined without regard to subsection (1) above.

(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F140

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Amendments (Textual)

F140Finance Act 1986 Sch. 19 para. 14,with effect from 18March 1986and repealed by Finance Act (No.2) 1987 s. 96(4)and Sch. 9 Part III,in relation to transfers of value made on or after 17March 1987.

[F14149AImmediate post-death interestE+W+S+N.I.

(1)Where a person (“L”) is beneficially entitled to an interest in possession in settled property, for the purposes of this Chapter that interest is an “immediate post-death interest” only if the following conditions are satisfied.

(2)Condition 1 is that the settlement was effected by will or under the law relating to intestacy.

(3)Condition 2 is that L became beneficially entitled to the interest in possession on the death of the testator or intestate.

(4)Condition 3 is that—

(a)section 71A below does not apply to the property in which the interest subsists, and

(b)the interest is not a disabled person's interest.

(5)Condition 4 is that Condition 3 has been satisfied at all times since L became beneficially entitled to the interest in possession.

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Amendments (Textual)

49BTransitional serial interestsE+W+S+N.I.

Where a person is beneficially entitled to an interest in possession in settled property, for the purposes of this Chapter that interest is a “transitional serial interest” only—

(a)if section 49C or 49D below so provides, or

(b)if, and to the extent that, section 49E below so provides.

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Amendments (Textual)

49CTransitional serial interest: interest to which person becomes entitled during period 22nd March 2006 to 5th April 2008E+W+S+N.I.

(1)Where a person (“B”) is beneficially entitled to an interest in possession in settled property (“the current interest”), that interest is a transitional serial interest for the purposes of this Chapter if the following conditions are met.

(2)Condition 1 is that—

(a)the settlement commenced before 22nd March 2006, and

(b)immediately before 22nd March 2006, the property then comprised in the settlement was property in which B, or some other person, was beneficially entitled to an interest in possession (“the prior interest”).

(3)Condition 2 is that the prior interest came to an end at a time on or after 22nd March 2006 but before 6th April 2008.

(4)Condition 3 is that B became beneficially entitled to the current interest at that time.

(5)Condition 4 is that—

(a)section 71A below does not apply to the property in which the interest subsists, and

(b)the interest is not a disabled person's interest.

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Amendments (Textual)

49DTransitional serial interest: interest to which person becomes entitled on death of spouse or civil partner on or after 6th April 2008E+W+S+N.I.

(1)Where a person (“E”) is beneficially entitled to an interest in possession in settled property (“the successor interest”), that interest is a transitional serial interest for the purposes of this Chapter if the following conditions are met.

(2)Condition 1 is that—

(a)the settlement commenced before 22nd March 2006, and

(b)immediately before 22nd March 2006, the property then comprised in the settlement was property in which a person other than E was beneficially entitled to an interest in possession (“the previous interest”).

(3)Condition 2 is that the previous interest came to an end on or after 6th April 2008 on the death of that other person (“F”).

(4)Condition 3 is that, immediately before F died, F was the spouse or civil partner of E.

(5)Condition 4 is that E became beneficially entitled to the successor interest on F's death.

(6)Condition 5 is that—

(a)section 71A below does not apply to the property in which the successor interest subsists, and

(b)the successor interest is not a disabled person's interest.

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Amendments (Textual)

49ETransitional serial interest: contracts of life insuranceE+W+S+N.I.

(1)Where—

(a)a person (“C”) is beneficially entitled to an interest in possession in settled property (“the present interest”), and

(b)on C's becoming beneficially entitled to the present interest, the settled property consisted of, or included, rights under a contract of life insurance entered into before 22nd March 2006,

the present interest so far as subsisting in rights under the contract, or in property comprised in the settlement that directly or indirectly represents rights under the contract, is a “transitional serial interest” for the purposes of this Chapter if the following conditions are met.

(2)Condition 1 is that—

(a)the settlement commenced before 22nd March 2006, and

(b)immediately before 22nd March 2006—

(i)the property then comprised in the settlement consisted of, or included, rights under the contract, and

(ii)those rights were property in which C, or some other person, was beneficially entitled to an interest in possession (“the earlier interest”).

(3)Condition 2 is that—

(a)the earlier interest came to an end at a time on or after 6th April 2008 (“the earlier-interest end-time”) on the death of the person beneficially entitled to it and C became beneficially entitled to the present interest—

(i)at the earlier-interest end-time, or

(ii)on the coming to an end, on the death of the person beneficially entitled to it, of an interest in possession to which that person became beneficially entitled at the earlier-interest end-time, or

(iii)on the coming to an end of the second or last in an unbroken sequence of two or more consecutive interests in possession to the first of which a person became beneficially entitled at the earlier-interest end-time and each of which ended on the death of the person beneficially entitled to it, or

(b)C became beneficially entitled to the present interest—

(i)on the coming to an end, on the death of the person entitled to it, of an interest in possession that is a transitional serial interest under section 49C above, or

(ii)on the coming to an end of the second or last in an unbroken sequence of two or more consecutive interests in possession the first of which was a transitional serial interest under section 49C above and each of which ended on the death of the person beneficially entitled to it.

(4)Condition 3 is that rights under the contract were comprised in the settlement throughout the period beginning with 22nd March 2006 and ending with C's becoming beneficially entitled to the present interest.

(5)Condition 4 is that—

(a)section 71A below does not apply to the property in which the present interest subsists, and

(b)the present interest is not a disabled person's interest.]

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Amendments (Textual)

50 Interests in part, etc.E+W+S+N.I.

(1)Where the person referred to in section 49(1) above is entitled to part only of the income (if any) of the property, the interest shall be taken to subsist in such part only of the property as bears to the whole the same proportion as the part of the income to which he is entitled bears to the whole of the income.

(2)Where the part of the income of any property to which a person is entitled is a specified amount (or the whole less a specified amount) in any period, his interest in the property shall be taken, subject to subsection (3) below, to subsist in such part (or in the whole less such part) of the property as produces that amount in that period.

(3)The Treasury may from time to time by order prescribe a higher and a lower rate for the purposes of this section; and where tax is chargeable in accordance with subsection (2) above by reference to the value of the part of a property which produces a specified amount or by reference to the value of the remainder (but not where chargeable transfers are made simultaneously and tax is chargeable by reference to the value of that part as well as by reference to the value of the remainder) the value of the part producing that specified amount—

(a)shall, if tax is chargeable by reference to the value of that part, be taken to be not less than it would be if the property produced income at the higher rate so prescribed, and

(b)shall, if tax is chargeable by reference to the value of the remainder, be taken to be not more than it would be if the property produced income at the lower rate so prescribed;

but the value to be taken by virtue of paragraph (a) above as the value of part of a property shall not exceed the value of the whole of the property.

(4)The power to make orders under subsection (3) above shall be exercisable by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons.

(5)Where the person referred to in section 49(1) above is not entitled to any income of the property but is entitled, jointly or in common with one or more other persons, to the use and enjoyment of the property, his interest shall be taken to subsist in such part of the property as corresponds to the proportion which the annual value of his interest bears to the aggregate of the annual values of his interest and that or those of the other or others.

(6)Where, under section 43(3) above, a lease of property is to be treated as a settlement, the lessee’s interest in the property shall be taken to subsist in the whole of the property less such part of it as corresponds to the proportion which the value of the lessor’s interest (as determined under Part VI of this Act) bears to the value of the property.

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Modifications etc. (not altering text)

C18 See S.I. 1980/1000 (in Part III Statutory Regulations etc.)for the current rates applicable.

51 Disposal of interest in possession.E+W+S+N.I.

(1)Where a person beneficially entitled to an interest in possession in settled property disposes of his interest the disposal—

(a)is not a transfer of value, but

(b)shall be treated for the purposes of this Chapter as the coming to an end of his interest;

and tax shall be charged accordingly under section 52 below.

[F142(1A)Where the interest disposed of is one to which the person became beneficially entitled on or after 22nd March 2006, subsection (1) above applies in relation to the disposal only if the interest is—

(a)an immediate post-death interest,

(b)a disabled person's interest within section 89B(1)(c) or (d) below, or

(c)a transitional serial interest.

(1B)Where the interest disposed of is one to which the person became beneficially entitled before 22nd March 2006, subsection (1) above does not apply in relation to the disposal if, immediately before the disposal, section 71A or 71D below applies to the property in which the interest subsists.]

(2)Where a disposition satisfying the conditions of section 11 above is a disposal of an interest in possession in settled property, the interest shall not by virtue of subsection (1) above be treated as coming to an end.

(3)References in this section to any property or to an interest in any property include references to part of any property or interest.

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Amendments (Textual)

52 Charge on termination of interest in possession.E+W+S+N.I.

(1)Where at any time during the life of a person beneficially entitled to an interest in possession in settled property his interest comes to an end, tax shall be charged, subject to section 53 below, as if at that time he had made a transfer of value and the value transferred had been equal to the value of the property in which his interest subsisted.

(2)If the interest comes to an end by being disposed of by the person beneficially entitled to it and the disposal is for a consideration in money or money’s worth, tax shall be chargeable under this section as if the value of the property in which the interest subsisted were reduced by the amount of the consideration; but in determining that amount the value of a reversionary interest in the property or of any interest in other property comprised in the same settlement shall be left out of account.

[F143(2A)Where the interest mentioned in subsection (1) or (2) above is one to which the person became beneficially entitled on or after 22nd March 2006, that subsection applies in relation to the coming to an end of the interest only if the interest is—

(a)an immediate post-death interest,

(b)a disabled person's interest, or

(c)a transitional serial interest.]

(3)Where a transaction is made between the trustees of the settlement and a person who is, or is connected with,—

(a)the person beneficially entitled to an interest in the property, or

(b)a person beneficially entitled to any other interest in that property or to any interest in any other property comprised in the settlement, or

(c)a person for whose benefit any of the settled property may be applied,

and, as a result of the transaction, the value of the first-mentioned property is less than it would be but for the transaction, a corresponding part of the interest shall be deemed for the purposes of this section to come to an end, unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value.

[F144(3A)Where the interest mentioned in paragraph (a) of subsection (3) above is one to which the person mentioned in that paragraph became beneficially entitled on or after 22nd March 2006, that subsection applies in relation to the transaction only if the interest is—

(a)an immediate post-death interest,

(b)a disabled person's interest, or

(c)a transitional serial interest.]

(4)References in this section or section 53 below to any property or to an interest in any property include references to part of any property or interest; and—

(a)the tax chargeable under this section on the coming to an end of part of an interest shall be charged as if the value of the property (or part) in which the interest subsisted were a corresponding part of the whole; and

(b)if the value of the property (or part) to which or to an interest in which a person becomes entitled as mentioned in subsection (2) of section 53 below is less than the value on which tax would be chargeable apart from that subsection, tax shall be chargeable on a value equal to the difference.

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Amendments (Textual)

53 Exceptions from charge under section 52.E+W+S+N.I.

(1)Tax shall not be chargeable under section 52 above if the settled property is excluded property.

[F145(1A)Tax shall not be chargeable under section 52 above if—

(a)the person whose interest comes to an end became beneficially entitled to the interest before 22nd March 2006,

(b)the interest comes to an end on or after that day, and

(c)immediately before the interest comes to an end, section 71A or 71D below applies to the property in which the interest subsists.]

(2)Tax shall not be chargeable under section 52 above (except in the case mentioned in subsection (4)(b) of that section) if the person whose interest in the property comes to an end becomes on the same occasion beneficially entitled to the property or to another interest in possession in the property.

[F146(2A)Where—

(a)a person becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property, and

(b)the interest is not a disabled person's interest,

subsection (2) above applies in relation to the coming to an end of the interest with the omission of the words “or to another interest in possession in the property”.]

(3)Tax shall not be chargeable under section 52 above if the interest comes to an end during the settlor’s life and on the same occasion the property in which the interest subsisted reverts to the settlor.

(4)Tax shall not be chargeable under section 52 above if on the occasion when the interest comes to an end—

(a)the settlor’s spouse [F147or civil partner], or

(b)where the settlor has died less than two years earlier, the settlor’s widow or widower [F148or surviving civil partner],

becomes beneficially entitled to the settled property and is domiciled in the United Kingdom.

(5)Subsections (3) and (4) above shall not apply in any case where—

(a)the settlor or the spouse [F149or civil partner] (or in a case within subsection (4)(b), the widow or widower [F150or surviving civil partner]) of the settlor had acquired a reversionary interest in the property for a consideration in money or money’s worth, or

(b)their application depends upon a reversionary interest having been transferred into a settlement on or after 10th March 1981.

(6)For the purposes of subsection (5) above a person shall be treated as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that interest or of other property.

(7)Where the acquisition of the interest was before 12th April 1978, subsection (5)(a) above shall have effect, so far as it relates to subsection (3) above, with the omission of the reference to the spouse [F151or civil partner] of the settlor.

(8)Subsection (6) above shall not apply where the person concerned became entitled to the interest before 12th April 1978.

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Amendments (Textual)

54 Exceptions from charge on deathE+W+S+N.I.

(1)Where a person is entitled to an interest in possession in settled property which on his death, but during the settlor’s life, reverts to the settlor, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

(2)Where on the death of a person entitled to an interest in possession in settled property—

(a)the settlor’s spouse [F152or civil partner], or

(b)if the settlor has died less than two years earlier, the settlor’s widow or widower [F153or surviving civil partner],

becomes beneficially entitled to the settled property and is domiciled in the United Kingdom, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

[F154(2A)Where a person becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property, subsections (1) and (2) above apply in relation to the interest only if it is—

(a)a disabled person's interest, or

(b)a transitional serial interest.

(2B)Where—

(a)a person (“B”) becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property,

(b)B dies,

(c)the interest in possession, throughout the period beginning with when B becomes beneficially entitled to it and ending with B's death, is an immediate post-death interest,

(d)the settlor died before B's death but less than two years earlier, and

(e)on B's death, the settlor's widow or widower, or surviving civil partner, becomes beneficially entitled to the settled property and is domiciled in the United Kingdom,

the value of the settled property shall be left out of account in determining for the purposes of this Act the value of B's estate immediately before his death.]

(3)Subsections (5) and (6) of section 53 above shall apply in relation to subsections [F155(1), (2) and (2B)] above as they apply in relation to section 53(3) and (4) [F156, but as if the reference in section 53(5)(a) above to section 53(4)(b) above were to subsection (2)(b) or (2B) above.] .

(4)For the purposes of this section, where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.

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Amendments (Textual)

[F15754A Special rate of charge where settled property affected by potentially exempt transfer.E+W+S+N.I.

(1)If the circumstances fall within subsection (2) below, this section applies to any chargeable transfer made—

(a)under section 52 above, on the coming to an end of an interest in possession in settled property during the life of the person beneficially entitled to it, or

(b)on the death of a person beneficially entitled to an interest in possession in settled property;

and in the following provisions of this section the interest in possession mentioned in paragraph (a) or paragraph (b) above is referred to as “the relevant interest”.

[F158(1A)Where a person becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property, subsection (1)(b) above applies in relation to the person's death only if the interest is—

(a)a disabled person's interest, or

(b)a transitional serial interest.]

(2)The circumstances referred to in subsection (1) above are—

(a)that the whole or part of the value transferred by the transfer is attributable to property in which the relevant interest subsisted and which became settled property in which there subsisted an interest in possession (whether the relevant interest or any previous interest) on the making by the settlor of a potentially exempt transfer at any time on or after 17th March 1987 and within the period of seven years ending with the date of the chargeable transfer; and

(b)that the settlor is alive at the time when the relevant interest comes to an end; and

(c)that, on the coming to an end of the relevant interest, any of the property in which that interest subsisted becomes settled property in which no qualifying interest in possession (as defined in section 59 below) subsists F159. . . ; and

(d)that, within six months of the coming to an end of the relevant interest, any of the property in which that interest subsisted has neither—

(i)become settled property in which a qualifying interest in possession subsists F159. . . , nor

(ii)become property to which an individual is beneficially entitled.

(3)In the following provisions of this section “the special rate property”, in relation to a chargeable transfer to which this section applies, means the property in which the relevant interest subsisted or, in a case where—

(a)any part of that property does not fall within subsection (2)(a) above, or

(b)any part of that property does not become settled property of the kind mentioned in subsection (2)(c) above,

so much of that property as appears to the Board or, on appeal, to the Special Commissioners to be just and reasonable.

(4)Where this section applies to a chargeable transfer (in this section referred to as “the relevant transfer”), the tax chargeable on the value transferred by the transfer shall be whichever is the greater of the tax that would have been chargeable apart from this section and the tax determined in accordance with subsection (5) below.

(5)The tax determined in accordance with this subsection is the aggregate of—

(a)the tax that would be chargeable on a chargeable transfer of the description specified in subsection (6) below, and

(b)so much (if any) of the tax that would, apart from this section, have been chargeable on the value transferred by the relevant transfer as is attributable to the value of property other than the special rate property.

(6)The chargeable transfer postulated in subsection (5)(a) above is one—

(a)the value transferred by which is equal to the value transferred by the relevant transfer or, where only part of that value is attributable to the special rate property, that part of that value;

(b)which is made at the time of the relevant transfer by a transferor who has in the preceding seven years made chargeable transfers having an aggregate value equal to the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of seven years ending with the date of the potentially exempt transfer; and

(c)for which the applicable rate or rates are one-half of the rate or rates referred to in section 7(1) above.

(7)This section has effect subject to section 54B below.]

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Amendments (Textual)

F157Finance Act 1987 (No. 2) Sch. 7 para. 1,with effect from 17March 1987.

F159Words in s. 54A(2)(c)(d)(i) repealed (22.3.2006 with effect as mentioned in Sch. 20 para. 16(4) of the amending Act) by Finance Act 2006 (c. 25), ss. 156, 160, Sch. 20 para. 16(3)(a)(b), {Sch. 26 Pt. 6 Note 1}

Modifications etc. (not altering text)

[F16054B Provisions supplementary to section 54A.E+W+S+N.I.

(1)The death of the settlor, at any time after a chargeable transfer to which section 54A above applies, shall not increase the tax chargeable on the value transferred by the transfer unless, at the time of the transfer, the tax determined in accordance with subsection (5) of that section is greater than the tax that would be chargeable apart from that section.

(2)The death of the person who was beneficially entitled to the relevant interest, at any time after a chargeable transfer to which section 54A above applies, shall not increase the tax chargeable on the value transferred by the transfer unless, at the time of the transfer, the tax that would be chargeable apart from that section is greater than the tax determined in accordance with subsection (5) of that section.

(3)Where the tax chargeable on the value transferred by a chargeable transfer to which section 54A above applies falls to be determined in accordance with subsection (5) of that section, the amount referred to in paragraph (a) of that subsection shall be treated for the purposes of this Act as tax attributable to the value of the property in which the relevant interest subsisted.

(4)Subsection (5) below shall apply if—

(a)during the period of seven years preceding the date on which a chargeable transfer to which section 54A above applies (“the current transfer”) is made, there has been another chargeable transfer to which that section applied, and

(b)the person who is for the purposes of the current transfer the settlor mentioned in subsection (2)(a) of that section is the settlor for the purposes of the other transfer (whether or not the settlements are the same);

and in subsections (5) and (6) below the other transfer is referred to as the “previous transfer”.

(5)Where this subsection applies, the appropriate amount in relation to the previous transfer (or, if there has been more than one previous transfer, the aggregate of the appropriate amounts in relation to each) shall, for the purposes of calculating the tax chargeable on the current transfer, be taken to be the value transferred by a chargeable transfer made by the settlor immediately before the potentially exempt transfer was made.

(6)In subsection (5) above “the appropriate amount”, in relation to a previous transfer, means so much of the value transferred by the previous transfer as was attributable to the value of property which was the special rate property in relation to that transfer.

(7)In this section—

  • the relevant interest” has the meaning given by subsection (1) of section 54A above; and

  • the special rate property” has the meaning given by subsection (3) of that section.]

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Amendments (Textual)

F160Finance Act 1987 (No. 2) Sch. 7 para. 1,with effect from 17March 1987.

[F16155A Purchased settlement powersE+W+S+N.I.

(1)Where a person makes a disposition by which he acquires a settlement power for consideration in money or money’s worth—

(a)section 10(1) above shall not apply to the disposition;

(b)the person shall be taken for the purposes of this Act to make a transfer of value;

(c)the value transferred shall be determined without bringing into account the value of anything which the person acquires by the disposition; and

(d)sections 18 and 23 to 27 above shall not apply in relation to that transfer of value.

(2)For the purposes of this section, a person acquires a settlement power if he becomes entitled—

(a)to a settlement power,

(b)to exercise, or to secure or prevent the exercise of, a settlement power (whether directly or indirectly), or

(c)to restrict, or secure a restriction on, the exercise of a settlement power (whether directly or indirectly),

as a result of transactions which include a disposition (whether to him or another) of a settlement power or of any power of a kind described in paragraph (b) or (c) above which is exercisable in relation to a settlement power.]

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Amendments (Textual)

F161S. 55A inserted (24.7.2002 with effect as mentioned in s. 119(6) of the amending Act) by 2002 c. 23, s. 119(3)(6)

55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56 Exclusion of certain exemptions.E+W+S+N.I.

(1)Sections 18 and 23 to 27 above shall not apply in relation to property which is given in consideration of the transfer of a reversionary interest if, by virtue of section 55(1) above, that interest does not form part of the estate of the person acquiring it.

(2)Where a person acquires a reversionary interest in any settled property for a consideration in money or money’s worth, section 18 above shall not apply in relation to the property when it becomes the property of that person on the termination of the interest on which the reversionary interest is expectant.

(3)Sections 23 to 27 above shall not apply in relation to any property if—

(a)the property is an interest in possession in settled property and the settlement does not come to an end in relation to that settled property on the making of the transfer of value, or

(b)immediately before the time when it becomes the property of the exempt body it is comprised in a settlement and, at or before that time, an interest under the settlement is or has been acquired for a consideration in money or money’s worth by that or another exempt body.

(4)In subsection (3)(b) above “exempt body” means a charity, political party or other body within sections 23 [F163to 25] above or the trustees of a settlement in relation to which a direction under paragraph 1 of Schedule 4 to this Act has effect; and for the purposes of subsection (3)(b) there shall be disregarded any acquisition from a charity, political party or body within sections 23 to 25.

(5)For the purposes of subsections (2) and (3) above, a person shall be treated as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition [F164for such consideration] (whether to him or another) of that interest or of other property.

(6)Nothing in this section shall apply to a transfer of value if or to the extent that it is a disposition whereby the use of money or other property is allowed by one person to another.

(7)Subsection (2) above shall not apply where the acquisition of the reversionary interest was before 16th April 1976; and where the acquisition was on or after that date but before 12th April 1978 that subsection shall have effect—

(a)with the substitution for the words “section 18 above” of the words “sections 18 and 23 [F163to 25] above”, and

(b)with the insertion after the word “person” in both places where it occurs of the words “or body”.

(8)Subsection (3)(b) above shall not apply where the acquisition of the interest was before 12th April 1978; and subsection (5) above shall not apply where the person concerned became entitled to the interest before that date.

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Amendments (Textual)

F163Words in s. 56(4)(7) substituted (31.7.1998 with effect in relation to any property becoming the property of any person on or after 17.3.1998) by 1998 c. 36, s. 143(3)

F164Finance Act 1987 (No. 2) Sch. 7, para. 2,with effect from 17March 1987.

57 Application of certain exemptions.E+W+S+N.I.

(1)Subject to subsection (3) below, references to transfers of value in sections 19 and 22 above shall be construed as including references to events on the happening of which tax is chargeable under section 52 above, and references to the transferor and (in section 22(3) and (4)) to a disposition shall be construed accordingly.

(2)For the purposes of its application, by virtue of subsection (1) above, to the termination of interests in possession in settled property, section 22 above shall have effect as if—

(a)references to transfers of value made by gifts in consideration of marriage [F165or civil partnership] were references to the termination of such interests in consideration of marriage [F165or civil partnership];

(b)references to outright gifts were references to cases where the property ceases on the termination to be settled property; and

(c)references to cases where the property is settled by the gift were references to cases where it remains settled property after the termination.

(3)Subsection (1) above shall not apply to a transfer of value—

(a)unless the transferor has in accordance with subsection (4) below given to the trustees of the settlement a notice informing them of the availability of an exemption, and

(b)except to the extent specified in that notice.

(4)A notice under subsection (3) above shall be in such form as may be prescribed by the Board and shall be given before the end of the period of six months beginning with the date of the transfer of value.

(5)Section 27 above shall apply where the value transferred by a transfer of value is attributable to property which immediately after the transfer remains comprised in a settlement as it applies where property becomes comprised in a settlement by virtue of the transfer.

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Amendments (Textual)

[F16657A Relief where property enters maintenance fund.E+W+S+N.I.

(1)Subject to the following provisions, subsection (2) below applies where—

(a)a person dies who immediately before his death was beneficially entitled to an interest in possession in property comprised in a settlement, and

(b)within two years after his death the property becomes held on trusts (whether of that or another settlement) by virtue of which a direction under paragraph 1 of Schedule 4 to this Act is given in respect of the property.

[F167(1A)Where the interest mentioned in subsection (1)(a) above is one to which the person became beneficially entitled on or after 22nd March 2006, subsection (2) below does not apply unless, immediately before the person's death, the interest was—

(a)an immediate post-death interest,

(b)a disabled person's interest, or

(c)a transitional serial interest.]

(2)Where this subsection applies, this Act shall have effect as if the property had on the death of the deceased become subject to the trusts referred to in subsection (1)(b) above; and accordingly no disposition or other event occurring between the date of the death and the date on which the property becomes subject to those trusts shall, so far as it relates to the property, be a transfer of value or otherwise constitute an occasion for a charge to tax.

(3)Where property becomes held on trusts of the kind specified in paragraph (b) of subsection (1) above as the result of proceedings before a court and could not have become so held without such proceedings, that paragraph shall have effect as if it referred to three years instead of two.

(4)Subsection (2) above shall not apply if—

(a)the disposition by which the property becomes held on the trusts referred to in subsection (1)(b) above depends on a condition or is defeasible; or

(b)the property which becomes held on those trusts is itself an interest in settled property; or

(c)the trustees who hold the property on those trusts have, for a consideration in money or money’s worth, acquired an interest under a settlement in which the property was comprised immediately before the death of the person referred to in subsection (1)(a) above or at any time thereafter; or

(d)the property which becomes held on those trusts does so for a consideration in money or money’s worth, or is acquired by the trustees for such a consideration, or has at any time since the death of the person referred to in subsection (1)(a) above been acquired by any other person for such a consideration.

(5)If the value of the property when it becomes held on the trusts referred to in subsection (1)(b) above is lower than so much of the value transferred on the death of the person referred to in subsection (1)(a) as is attributable to the property, subsection (2) above shall apply to the property only to the extent of the lower value.

(6)For the purposes of this section, a person shall be treated as acquiring property for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property. F166]]

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Amendments (Textual)

F166Finance Act 1987 Sch. 9, para. 1,in relation to deaths occurring on or after 17March 1987.

CHAPTER IIIE+W+S+N.I. SETTLEMENTS WITHOUT INTERESTS IN POSSESSION [F168, AND CERTAIN SETTLEMENTS IN WHICH INTERESTS IN POSSESSION SUBSIST]

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Amendments (Textual)

F168Words in Pt. 3 Ch. 3 heading added (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 20(5)

Modifications etc. (not altering text)

C21 See Finance Act 1990 s. 126—exemption for pools payments to trustees for football ground improvements in respect of events on or after 6April 1990.

C24Part III Chapter III (ss.58-85) excluded by Finance Act 1991 (c.31, SIF 63:1), s. 121(4).

Pt. III Ch. III (ss. 58-85) restricted (3.5.1994) by 1994 c. 9, s. 248

InterpretationE+W+S+N.I.

58 Relevant property.E+W+S+N.I.

(1)In this Chapter “relevant property” means settled property in which no qualifying interest in possession subsists, other than—

(a)property held for charitable purposes only, whether for a limited time or otherwise;

(b)property to which section 71, [F16971A, 71D,] 73, 74 or 86 below applies [F170(but see subsection (1A) below)] ;

(c)property held on trusts which comply with the requirements mentioned in paragraph 3(1) of Schedule 4 to this Act, and in respect of which a direction given under paragraph 1 of that Schedule has effect;

[F171(d)property which is held for the purposes of a registered pension scheme or section 615(3) scheme;]

(e)property comprised in a trade or professional compensation fund; and

(f)excluded property.

[F172(1A)Settled property to which section 86 below applies is “relevant property” for the purposes of this Chapter if—

(a)an interest in possession subsists in that property, and

(b)that interest falls within subsection (1B) or (1C) below.

(1B)An interest in possession falls within this subsection if—

(a)an individual is beneficially entitled to the interest in possession,

(b)the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, and

(c)the interest in possession is—

(i)not an immediate post-death interest,

(ii)not a disabled person's interest, and

(iii)not a transitional serial interest.

(1C)An interest in possession falls within this subsection if—

(a)a company is beneficially entitled to the interest in possession,

(b)the business of the company consists wholly or mainly in the acquisition of interests in settled property,

(c)the company has acquired the interest in possession for full consideration in money or money's worth from an individual who was beneficially entitled to it,

(d)the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, and

(e)immediately before the company acquired the interest in possession, the interest in possession was neither an immediate post-death interest nor a transitional serial interest.]

(2)The reference in subsection (1)(d) above to property which is F173. . . held for the purposes of a F173. . . scheme does not include a reference to a benefit which, having become payable under the F173. . . scheme, becomes comprised in a settlement.

[F174(2A)For the purposes of subsection (1)(d) above—

(a)property applied to pay lump sum death benefits within section 168(1) of the Finance Act 2004 in respect of a member of a registered pension scheme is to be taken to be held for the purposes of the scheme from the time of the member's death until the payment is made, and

(b)property applied to pay lump sum death benefits in respect of a member of a section 615(3) scheme is to be taken to be so held if the benefits are paid within the period of two years beginning with the earlier of the day on which the member's death was first known to the trustees or other persons having the control of the fund and the day on which they could first reasonably be expected to have known of it.]

(3)In subsection (1)(e) above “trade or professional compensation fund” means a fund which is maintained or administered by a representative association of persons carrying on a trade or profession and the only or main objects of which are compensation for or relief of losses or hardship that, through the default or alleged default of persons carrying on the trade or profession or of their agents or servants, are incurred or likely to be incurred by others.

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Amendments (Textual)

F173Words in s. 58(2) repealed (6.4.2006) by Finance Act 2004 (c. 12), s. 326, Sch. 42 Pt. 3 (with Sch. 36)

F174S. 58(2A) inserted (with effect in relation to lump sum death benefits paid on or after 6.4.2006) by Finance Act 2007 (c. 11), s. 70, Sch. 20 paras. 20, 24(9)

Modifications etc. (not altering text)

59 Qualifying interest in possession.E+W+S+N.I.

[F175(1)In this Chapter “qualifying interest in possession” means—

(a)an interest in possession—

(i)to which an individual is beneficially entitled, and

(ii)which, if the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, is an immediate post-death interest, a disabled person's interest or a transitional serial interest, or

(b)an interest in possession to which, where subsection (2) below applies, a company is beneficially entitled.]

(2)This subsection applies where—

(a)the business of the company consists wholly or mainly in the acquisisition of interests in settled property, and

(b)the company has acquired the interest for full consideration in money or money’s worth from an individual who was beneficially entitled to it.[F176, and

(c)if the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, the interest is an immediate post-death interest, or a disabled person's interest within section 89B(1)(c) or (d) below or a transitional serial interest, immediately before the company acquires it.]

(3)Where the acquisition mentioned in paragraph (b) of subsection (2) above was before 14th March 1975—

(a)the condition set out in paragraph (a) of that subsection shall be treated as satisfied if the business of the company was at the time of the acquisition such as is described in that paragraph, and

(b)that condition need not be satisfied [F177if the company is an insurance company (within the meaning of Chapter I of Part XII of the M11Taxes Act 1988) and [F178has permission—

(i)under Part 4 of the Financial Services and Markets Act 2000, or

(ii)under paragraph 15 of Schedule 3 to that Act F179 (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule),

to effect or carry out contracts of long-term insurance.]

[F180(4)In subsection (3)(b) above “contracts of long-term insurance” means contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 F181.]]

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Amendments (Textual)

F177S. 59(3)(b)(i)(ii) and words substituted (1.5.1995 with effect as mentioned in s. 52(5) of the amending Act) by 1995 c. 4, s. 52(4)

F178S. 59(3)(b)(i)(ii) and both preceding and following words substituted for s. 59(3)(b)(i)(ii) and words preceding (1.12.2001 with effect as mentioned in art. 5(4) of the amending S.I.) by S.I. 2001/3629, art. 5(1)(2)(4)

F179Schedule 3 was amended by regulation 8 of S.I. 2000/2952.

F180S. 59(4) added (1.12.2001 with effect as mentioned in art. 5(4) of the amending S.I.) by S.I. 2001/3629, art. 5(1)(3)(4)

Marginal Citations

60 Commencement of settlement.E+W+S+N.I.

In this Chapter references to the commencement of a settlement are references to the time when property first becomes comprised in it.

61 Ten-year anniversary.E+W+S+N.I.

(1)In this Chapter “ten-year anniversary” in relation to a settlement means the tenth anniversary of the date on which the settlement commenced and subsequent anniversaries at ten-yearly intervals, but subject to subsections (2) to (4) below.

(2)The ten-year anniversaries of a settlement treated as made under section 80 below shall be the dates that are (or would but for that section be) the ten-year anniversaries of the settlement first mentioned in that section.

(3)No date falling before 1st April 1983 shall be a ten-year anniversary.

(4)Where—

(a)the first ten-year anniversary of a settlement would apart from this subsection fall during the year ending with 31st March 1984, and

(b)during that year an event occurs in respect of the settlement which could not have occurred except as the result of some proceedings before a court, and

(c)the event is one on which tax was chargeable under Chapter II of Part IV of the M12Finance Act 1982 (or, apart from Part II of Schedule 15 to that Act, would have been so chargeable),

the first ten-year anniversary shall be taken to be 1st April 1984 (but without affecting the dates of later anniversaries).

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Marginal Citations

62 Related settlements.E+W+S+N.I.

(1)For the purposes of this Chapter two settlements are related if and only if—

(a)the settlor is the same in each case, and

(b)they commenced on the same day,

but subject to subsection (2) below.

(2)Two settlements are not related for the purposes of this Chapter if all the property comprised in one or both of them was immediately after the settlement commenced held for charitable purposes only without limit of time (defined by a date or otherwise).

63 Minor interpretative provisions.E+W+S+N.I.

In this Chapter, unless the context otherwise requires—

  • payment” includes a transfer of assets other than money;

  • quarter” means period of three months.

Principal charge to taxE+W+S+N.I.

64 Charge at ten-year anniversary.E+W+S+N.I.

Where immediately before a ten-year anniversary all or any part of the property comprised in a settlement is relevant property, tax shall be charged at the rate applicable under sections 66 and 67 below on the value of the property or part at that time.

65 Charge at other times.E+W+S+N.I.

(1)There shall be a charge to tax under this section—

(a)where the property comprised in a settlement or any part of that property ceases to be relevant property (whether because it ceases to be comprised in the settlement or otherwise); and

(b)in a case in which paragraph (a) above does not apply, where the trustees of the settlement make a disposition as a result of which the value of relevant property comprised in the settlement is less than it would be but for the disposition.

(2)The amount on which tax is charged under this section shall be—

(a)the amount by which the value of relevant property comprised in the settlement is less immediately after the event in question that it would be but for the event, or

(b)where the tax payable is paid out of relevant property comprised in the settlement immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

(3)The rate at which tax is charged under this section shall be the rate applicable under section 68 or 69 below.

(4)Subsection (1) above does not apply if the event in question occurs in a quarter beginning with the day on which the settlement commenced or with a ten-year anniversary.

(5)Tax shall not be charged under this section in respect of—

(a)a payment of costs or expenses (so far as they are fairly attributable to relevant property), or

(b)a payment which is (or will be) income of any person for any of the purposes of income tax or would for any of those purposes be income of a person not resident in the United Kingdom if he were so resident,

or in respect of a liability to make such a payment.

(6)Tax shall not be charged under this section by virtue of subsection (1)(b) above if the disposition is such that, were the trustees beneficially entitled to the settled property, section 10 or section 16 above would prevent the disposition from being a transfer of value.

(7)Tax shall not be charged under this section by reason only that property comprised in a settlement ceases to be situated in the United Kingdom and thereby becomes excluded property by virtue of section 48(3)(a) above.

(8)If the settlor of a settlement was not domiciled in the United Kingdom when the settlement was made, tax shall not be charged under this section by reason only that property comprised in the settlement is invested in securities issued by the Treasury subject to a condition of the kind mentioned in section 6(2) above and thereby becomes excluded property by virtue of section 48(4)(b) above.

(9)For the purposes of this section trustees shall be treated as making a disposition if they omit to exercise a right (unless it is shown that the omission was not deliberate) and the disposition shall be treated as made at the time or latest time when they could have exercised the right.

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Modifications etc. (not altering text)

C26S. 65 restricted (31.7.1998 with effect as mentioned in s. 161(1) of the amending Act) by 1998 c. 36, s. 161(3)

Rates of principal chargeE+W+S+N.I.

66 Rate of ten-yearly charge.E+W+S+N.I.

(1)Subject to subsection (2) below, the rate at which tax is charged under section 64 above at any time shall be three tenths of the effective rate (that is to say the rate found by expressing the tax chargeable as a percentage of the amount on which it is charged) at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (3) below.

(2)Where the whole or part of the value mentioned in section 64 above is attributable to property which was not relevant property, or was not comprised in the settlement, throughout the period of ten years ending immediately before the ten-year anniversary concerned, the rate at which tax is charged on that value or part shall be reduced by one-fortieth for each of the successive quarters in that period which expired before the property became, or last became, relevant property comprised in the settlement.

(3)The chargeable transfer postulated in subsection (1) above is one—

(a)the value transferred by which is equal to an amount determined in accordance with subsection (4) below;

(b)which is made immediately before the ten-year anniversary concerned by a transferor who has in the [F182preceding seven years] made chargeable transfers having an aggregate value determined in accordance with subsection (5) below; and

[F183(c)on which tax is charged in accordance with section 7(2) of this Act]

(4)The amount referred to in subsection (3)(a) above is equal to the aggregate of—

(a)the value on which is charged under section 64 above;

(b)the value immediately after it became comprised in the settlement of any property which was not then relevant property and has not subsequently become relevant property while remaining comprised in the settlement; and

(c)the value, immediately after a related settlement commenced, of the property then comprised in it;

but subject to subsection (6) below.

(5)The aggregate value referred to in subsection (3)(b) above is equal to the aggregate of—

(a)the values transferred by any chargeable transfers made by the settlor in the period of [F184seven] years ending with the day on which the settlement commenced, disregarding transfers made on that day or before 27th March 1974, and

(b)the amounts on which any charges to tax were imposed under section 65 above in respect of the settlement in the ten years before the anniversary concerned;

but subject to subsection (6) and section 67 below.

(6)In relation to a settlement which commenced before 27th March 1974—

(a)subsection (4) above shall have effect with the omission of paragraphs (b) and (c); and

(b)subsection (5) above shall have effect with the omission of paragraph (a);

and where tax is chargeable under section 64 above by reference to the first ten-year anniversary of a settlement which commenced before 9th March 1982, the aggregate mentioned in subsection (5) above shall be increased by the amounts of any distribution payments (determined in accordance with the rules applicable under paragraph 11 of Schedule 5 to the M13Finance Act 1975) made out of settled property before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the M14Finance Act 1982 applied, 1st April 1983, or, as the case may be, 1st April 1984) and within the period of ten years before the anniversary concerned.

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Amendments (Textual)

F182Finance Act 1986 Sch. 19 para. 16(1),with effect from 18March 1986originally

“preceding ten years”.

F183Finance Act 1986 Sch. 19 para. 16(2),with effect from 18March 1986.Originally

“(c) for which the appropriate Table of rates is the second Table in Schedule 1 to this Act.”

F184Finance Act 1986 Sch. 19 para. 16(3),with effect from 18March 1986.Originally

“ten”.

Marginal Citations

67 Added property, etc.E+W+S+N.I.

(1)This subsection applies where, after the settlement commenced and after 8th March 1982, but before the anniversary concerned, the settlor made a chargeable transfer as a result of which the value of the property comprised in the settlement was increased.

(2)For the purposes of subsection (1) above, it is immaterial whether the amount of the property so comprised was increased as a result of the transfer, but a transfer as a result of which the value increased but the amount did not shall be disregarded if it is shown that the transfer—

(a)was not primarily intended to increase the value, and

(b)did not result in the value being greater immediately after the transfer by an amount exceeding five per cent. of the value immediately before the transfer.

(3)Where subsection (1) above applies in relation to a settlement which commenced after 26th March 1974, section 66(5)(a) above shall have effect as if it referred to the greater of—

(a)the aggregate of the values there specified, and

(b)the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of [F185seven] years ending with the day on which the chargeable transfer falling within subsection (1) above was made—

(i)disregarding transfers made on that day or before 27th March 1974, and

(ii)excluding the values mentioned in subsection (5) below;

and where the settlor made two or more chargeable transfers falling within subsection (1) above, paragraph (b) above shall be taken to refer to the transfer in relation to which the aggregate there mentioned is the greatest.

(4)Where subsection (1) above applies in relation to a settlement which commenced before 27th March 1974, the aggregate mentioned in section 66(5) above shall be increased (or further increased) by the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of [F186seven] years ending with the day on which the chargeable transfer falling within subsection (1) above was made—

(a)disregarding transfers made on that day or before 27th March 1974, and

(b)excluding the values mentioned in subsection (5) below; and where the settlor made two or more chargeable transfers falling within subsection (1) above, this subsection shall be taken to refer to the transfer in relation to which the aggregate to be added is the greatest.

(5)The values excluded by subsections (3)(b)(ii) and (4)(b) above are—

(a)any value attributable to property whose value is taken into account in determining the amount mentioned in section 66(4) above; and

(b)any value attributable to property in respect of which a charge to tax has been made under section 65 above and by reference to which an amount mentioned in section 66(5)(b) above is determined.

(6)Where the property comprised in a settlement immediately before the ten-year anniversary concerned, or any part of that property, had on any occasion within the preceding ten years ceased to be relevant property then, if on that occasion tax was charged in respect of the settlement under section 65 above, the aggregate mentioned in section 66(5) above shall be reduced by an amount equal to the lesser of—

(a)the amount on which tax was charged under section 65 (or so much of that amount as is attributable to the part in question), and

(b)the value on which tax is charged under section 64 above (or so much of that value as is attributable to the part in question);

and if there were two or more such occasions relating to the property or the same part of it, this subsection shall have effect in relation to each of them.

(7)References in subsection (6) above to the property comprised in a settlement immediately before an anniversary shall, if part only of the settled property was then relevant property, be construed as references to that part.

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Amendments (Textual)

F185Finance Act 1986 Sch. 19 para. 17,with effect from 18March 1986.Originally

“ten”.

F186Finance Act 1986 Sch. 19 para. 17,with effect from 18March 1986.Originally

“ten”.

68 Rate before first ten-year anniversary.E+W+S+N.I.

(1)The rate at which tax is charged under section 65 above on an occasion preceding the first ten-year anniversary after the settlement’s commencement shall be the appropriate fraction of the effective rate at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (4) below (but subject to subsection (6) below).

(2)For the purposes of this section the appropriate fraction is three tenths multiplied by so many fortieths as there are complete successive quarters in the period beginning with the day on which the settlement commenced and ending with the day before the occasion of the charge, but subject to subsection (3) below.

(3)Where the whole or part of the amount on which tax is charged is attributable to property which was not relevant property, or was not comprised in the settlement, throughout the period referred to in subsection (2) above, then in determining the appropriate fraction in relation to that amount or part—

(a)no quarter which expired before the day on which the property became, or last became, relevant property comprised in the settlement shall be counted, but

(b)if that day fell in the same quarter as that in which the period ends, that quarter shall be counted whether complete or not.

(4)The chargeable transfer postulated in subsection (1) above is one—

(a)the value transferred by which is equal to an amount determined in accordance with subsection (5) below;

(b)which is made at the time of the charge to tax under section 65 by a transferor who has in the period of [F187seven] years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to that of any chargeable transfers made by the settlor in the period of [F188seven] years ending with the day on which the settlement commenced, disregarding transfers made on that day or before 27th March 1974; and

[F189(c)on which tax is charged in accordance with section 7(2) of this Act.]

(5)The amount referred to in subsection (4)(a) above is equal to the aggregate of—

(a)the value, immediately after the settlement commenced, of the property then comprised in it;

(b)the value, immediately after a related settlement commenced, of the property then comprised in it; and

(c)the value, immediately after it became comprised in the settlement, of any property which became so comprised after the settlement commenced and before the occasion of the charge under section 65 (whether or not it has remained so comprised).

(6)Where the settlement commenced before 27th March 1974, subsection (1) above shall have effect with the substitution of a reference to three tenths for the reference to the appropriate fraction; and in relation to such a settlement the chargeable transfer postulated in that subsection is one—

(a)the value transferred by which is equal to the amount on which tax is charged under section 65 above;

(b)which is made at the time of that charge to tax by a transferor who has in the period of [F190seven] years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to the aggregate of—

(i)any amounts on which any charges to tax have been imposed under section 65 above in respect of the settlement in [F191the period of ten years ending with that day]; and

(ii)the amounts of any distribution payments (determined in accordance with the rules applicable under paragraph 11 of Schedule 5 to the M15Finance Act 1975) made out of the settled property before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the M16Finance Act 1982 applied, 1st April 1983, or, as the case may be, 1st April 1984) and within the said period of ten years; and

[F192(c)on which tax is charged in accordance with section 7(2) of this Act.]

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Amendments (Textual)

F187Finance Act 1986 Sch. 19 para. 18(1),with effect from 18March 1986.Originally

“ten”.

F188Finance Act 1986 Sch. 19 para. 18(1),with effect from 18March 1986.Originally

“ten”.

F189Finance Act 1986 Sch. 19 para. 18(2),with effect from 18March 1986.Originally

“(c) for which the appropriate Table of rates is the second Table in Schedule 1 to this Act.”.

F190Finance Act 1986 Sch. 19 para. 18(3)(a),with effect from 18March 1986.Originally

“ten”.

F191Finance Act 1986 Sch. 19 para. 18(3)(b),with effect from 18March 1986.Originally

“that period of ten years”.

F192Finance Act 1986 Sch. 19 para. 18(2),with effect from 18March 1986.Originally

“for which the appropriate Table of rates is the second Table in Schedule 1 to this Act.”

Marginal Citations

69 Rate between ten-year anniversaries.E+W+S+N.I.

(1)Subject to subsection (2) below, the rate at which tax is charged under section 65 above on an occasion following one or more ten-year anniversaries after the settlement’s commencement shall be the appropriate fraction of the rate at which it was last charged under section 64 (or would have been charged apart from section 66(2)).

(2)If at any time before the occasion of the charge under section 65 and on or after the most recent ten-year anniversary—

(a)property has become comprised in the settlement, or

(b)property which was comprised in the settlement immediately before the anniversary, but was not then relevant property, has become relevant property,

then, whether or not the property has remained comprised in the settlement or has remained relevant property, the rate at which tax is charged under section 65 shall be the appropriate fraction of the rate at which it would last have been charged under section 64 (apart from section 66(2)) if immediately before that anniversary the property had been relevant property comprised in the settlement with a value determined in accordance with subsection (3) below.

(3)In the case of property within subsection (2)(a) above which either—

(a)was relevant property immediately after it became comprised in the settlement, or

(b)was not then relevant property and has not subsequently become relevant property while remaining comprised in the settlement,

the value to be attributed to it for the purposes of subsection (2) above is its value immediately after it became comprised in the settlement; and in any other case the value to be so attributed is the value of the property when it became (or last became) relevant property.

(4)For the purposes of this section the appropriate fraction is so many fortieths as there are complete successive quarters in the period beginning with the most recent ten-year anniversary and ending with the day before the occasion of the charge; but subsection (3) of section 68 above shall have effect for the purposes of this subsection as it has effect for the purposes of subsection (2) of that section.

Special cases—charges to taxE+W+S+N.I.

70 Property leaving temporary charitable trusts.E+W+S+N.I.

(1)This section applies to settled property held for charitable purposes only until the end of a period (whether defined by a date or in some other way).

(2)Subject to subsections (3) and (4) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which this section applies, otherwise than by virtue of an application for charitable purposes, and

(b)in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by an application of property for charitable purposes) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3)Tax shall not be charged under this section in respect of—

(a)a payment of costs or expenses (so far as they are fairly attributable to property to which this section applies), or

(b)a payment which is (or will be) income of any person for any of the purposes of income tax or would for any of those purposes be income of a person not resident in the United Kingdom if he were so resident,

or in respect of a liability to make such a payment.

(4)Tax shall not be charged under this section by virtue of subsection (2)(b) above if the disposition is such that, were the trustees beneficially entitled to the settled property, section 10 or section 16 above would prevent the disposition from being a transfer of value.

(5)The amount on which tax is charged under this section shall be—

(a)the amount by which the value of property which is comprised in the settlement and to which this section applies is less immediately after the event giving rise to the charge than it would be but for the event, or

(b)where the tax payable is paid out of settled property to which this section applies immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

(6)The rate at which tax is charged under this section shall be the aggregate of the following percentages—

(a)0.25 per cent. for each of the first forty complete successive quarters in the relevant period,

(b)0.20 per cent. for each of the next forty,

(c)0.15 per cent. for each of the next forty,

(d)0.10 per cent. for each of the next forty, and

(e)0.05 per cent. for each of the next forty.

(7)Where the whole or part of the amount on which tax is charged under this section is attributable to property which was excluded property at any time during the relevant period then, in determining the rate at which tax is charged under this section in respect of that amount or part, no quarter throughout which that property was excluded property shall be counted.

(8)In subsections (6) and (7) above “the relevant period” means the period beginning with the later of—

(a)the day on which the property in respect of which tax is chargeable became (or last became) property to which this section applies, and

(b)13th March 1975,

and ending with the day before the event giving rise to the charge.

(9)Where the property in respect of which tax is chargeable—

(a)was relevant property immediately before 10th December 1981, and

(b)became (or last became) property to which this section applies on or after that day and before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the M17Finance Act 1982 applied, 1st April 1983 or, as the case may be, 1st April 1984),

subsection (8) above shall have effect as if the day referred to in paragraph (a) of that subsection were the day on which the property became (or last became) relevant property before 10th December 1981.

(10)For the purposes of this section trustees shall be treated as making a disposition if they omit to exercise a right (unless it is shown that the omission was not deliberate) and the disposition shall be treated as made at the time or latest time when they could have exercised the right.

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Marginal Citations

71 Accumulation and maintenance trusts.E+W+S+N.I.

(1)Subject to [F193subsections (1A) to](2) below, this section applies to settled property if—

(a)one or more persons (in this section referred to as beneficiaries) will, on or before attaining a specified age not exceeding [F194eighteen] , become beneficially entitled to it F195. . . , and

(b)no interest in possession subsists in it and the income from it is to be accumulated so far as not applied for the maintenance, education or benefit of a beneficiary.

[F196(1A)This section does not apply to settled property at any particular time on or after 22nd March 2006 unless this section—

(a)applied to the settled property immediately before 22nd March 2006, and

(b)has applied to the settled property at all subsequent times up to the particular time.

(1B)This section does not apply to settled property at any particular time on or after 22nd March 2006 if, at that time, section 71A below applies to the settled property.]

(2)This section does not apply to settled property unless either—

(a)not more than twenty-five years have elapsed since the commencement of the settlement or, if it was later, since the time (or latest time) when the conditions stated in paragraphs (a) and (b) of subsection (1) above became satisfied with respect to the property, or

(b)all the persons who are or have been beneficiaries are or were either—

(i)grandchildren of a common grandparent, or

(ii)children, widows or widowers [F197or surviving civil partners] of such grandchildren who were themselves beneficiaries but died before the time when, had they survived, they would have become entitled as mentioned in subsection (1)(a) above.

(3)Subject to subsections (4) and (5) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which this section applies, and

(b)in a case in which paragraph (a) above does not apply, where the trustees make a disposition as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(4)Tax shall not be charged under this section—

(a)on a beneficiary’s becoming beneficially entitled to, or to an interest in possession in, settled property on or before attaining the specified age, or

(b)on the death of a beneficiary before attaining the specified age.

(5)Subsections (3) to (8) and (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section (with the substitution of a reference to subsection (3)(b) above for the reference in section 70(4) to section 70(2)(b)).

(6)Where the conditions stated in paragraphs (a) and (b) of subsection (1) above were satisfied on 15th April 1976 with respect to property comprised in a settlement which commenced before that day, subsection (2)(a) above shall have effect with the substitution of a reference to that day for the reference to the commencement of the settlement, and the condition stated in subsection (2)(b) above shall be treated as satisfied if—

(a)it is satisfied in respect of the period beginning with 15th April 1976, or

(b)it is satisfied in respect of the period beginning with 1st April 1977 and either there was no beneficiary living on 15th April 1976 or the beneficiaries on 1st April 1977 included a living beneficiary, or

(c)there is no power under the terms of the settlement whereby it could have become satisfied in respect of the period beginning with 1st April 1977, and the trusts of the settlement have not been varied at any time after 15th April 1976.

(7)In subsection (1) above “persons” includes unborn persons; but the conditions stated in that subsection shall be treated as not satisfied unless there is or has been a living beneficiary.

(8)For the purposes of this section a person’s children shall be taken to include his illegitimate children, his adopted children and his stepchildren.

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Amendments (Textual)

F194Word in s. 71(1)(a) substituted (6.4.2008 in accordance with Sch. 20 para. 3(2) of the amending Act) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 3(1)(a)

F195Words in s. 71(1)(a) repealed (6.4.2008 in accordance with Sch. 20 para. 3(2) of the amending Act) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 3(1)(b), Sch. 26 Pt. 6

Modifications etc. (not altering text)

[F19871ATrusts for bereaved minorsE+W+S+N.I.

(1)This section applies to settled property (including property settled before 22nd March 2006) if—

(a)it is held on statutory trusts for the benefit of a bereaved minor under sections 46 and 47(1) of the Administration of Estates Act 1925 (succession on intestacy and statutory trusts in favour of issue of intestate), or

(b)it is held on trusts for the benefit of a bereaved minor and subsection (2) below applies to the trusts,

but this section does not apply to property in which a disabled person's interest subsists.

(2)This subsection applies to trusts—

(a)established under the will of a deceased parent of the bereaved minor, or

(b)established under the Criminal Injuries Compensation Scheme,

which secure that the conditions in subsection (3) below are met.

(3)Those conditions are—

(a)that the bereaved minor, if he has not done so before attaining the age of 18, will on attaining that age become absolutely entitled to—

(i)the settled property,

(ii)any income arising from it, and

(iii)any income that has arisen from the property held on the trusts for his benefit and been accumulated before that time,

(b)that, for so long as the bereaved minor is living and under the age of 18, if any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of the bereaved minor, and

(c)that, for so long as the bereaved minor is living and under the age of 18, either—

(i)the bereaved minor is entitled to all of the income (if there is any) arising from any of the settled property, or

(ii)no such income may be applied for the benefit of any other person.

(4)Trusts such as are mentioned in paragraph (a) or (b) of subsection (2) above are not to be treated as failing to secure that the conditions in subsection (3) above are met by reason only of—

(a)the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(b)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(c)the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(d)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(e)the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (a) to (d) above.

(5)In this section “the Criminal Injuries Compensation Scheme” means—

(a)the schemes established by arrangements made under the Criminal Injuries Compensation Act 1995,

(b)arrangements made by the Secretary of State for compensation for criminal injuries in operation before the commencement of those schemes, and

(c)the scheme established under the Criminal Injuries Compensation (Northern Ireland) Order 2002.

(6)The preceding provisions of this section apply in relation to Scotland as if, in subsection (2) above, before “which” there were inserted the purposes of.

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Amendments (Textual)

71BCharge to tax on property to which section 71A appliesE+W+S+N.I.

(1)Subject to subsections (2) and (3) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which section 71A above applies, and

(b)in a case where paragraph (a) above does not apply, where the trustees make a disposition as a result of which the value of settled property to which section 71A above applies is less than it would be but for the disposition.

(2)Tax is not charged under this section where settled property ceases to be property to which section 71A applies as a result of—

(a)the bereaved minor attaining the age of 18 or becoming, under that age, absolutely entitled as mentioned in section 71A(3)(a) above, or

(b)the death under that age of the bereaved minor, or

(c)being paid or applied for the advancement or benefit of the bereaved minor.

(3)Subsections (3) to (8) and (10) of section 70 above apply for the purposes of this section as they apply for the purposes of that section, but—

(a)with the substitution of a reference to subsection (1)(b) above for the reference in subsection (4) of section 70 above to subsection (2)(b) of that section,

(b)with the substitution of a reference to property to which section 71A above applies for each of the references in subsections (3), (5) and (8) of section 70 above to property to which that section applies,

(c)as if, for the purposes of section 70(8) above as applied by this subsection, property—

(i)which is property to which section 71A above applies,

(ii)which, immediately before it became property to which section 71A above applies, was property to which section 71 above applied, and

(iii)which, by the operation of section 71(1B) above, ceased on that occasion to be property to which section 71 above applied,

had become property to which section 71A above applies not on that occasion but on the occasion (or last occasion) before then when it became property to which section 71 above applied, and

(d)as if, for the purposes of section 70(8) above as applied by this subsection, property—

(i)which is property to which section 71A above applies,

(ii)which, immediately before it became property to which section 71A above applies, was property to which section 71D below applied, and

(iii)which, by the operation of section 71D(5)(a) below, ceased on that occasion (“the 71D-to-71A occasion”) to be property to which section 71D below applied,

had become property to which section 71A above applies not on the 71D-to-71A occasion but on the relevant earlier occasion.

(4)In subsection (3)(d) above—

(a)the relevant earlier occasion” means the occasion (or last occasion) before the 71D-to-71A occasion when the property became property to which section 71D below applied, but

(b)if the property, when it became property to which section 71D below applied, ceased at the same time to be property to which section 71 above applied without ceasing to be settled property, “the relevant earlier occasion” means the occasion (or last occasion) when the property became property to which section 71 above applied.

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Amendments (Textual)

71CSections 71A and 71B: meaning of “bereaved minor”E+W+S+N.I.

In sections 71A and 71B above “bereaved minor” means a person—

(a)who has not yet attained the age of 18, and

(b)at least one of whose parents has died.

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Amendments (Textual)

71DAge 18-to-25 trustsE+W+S+N.I.

(1)This section applies to settled property (including property settled before 22nd March 2006), but subject to subsection (5) below, if—

(a)the property is held on trusts for the benefit of a person who has not yet attained the age of 25,

(b)at least one of the person's parents has died, and

(c)subsection (2) below applies to the trusts.

(2)This subsection applies to trusts—

(a)established under the will of a deceased parent of the person mentioned in subsection (1)(a) above, or

(b)established under the Criminal Injuries Compensation Scheme,

which secure that the conditions in subsection (6) below are met.

(3)Subsection (4) has effect where—

(a)at any time on or after 22nd March 2006 but before 6th April 2008, or on the coming into force of paragraph 3(1) of Schedule 20 to the Finance Act 2006, any property ceases to be property to which section 71 above applies without ceasing to be settled property, and

(b)immediately after the property ceases to be property to which section 71 above applies—

(i)it is held on trusts for the benefit of a person who has not yet attained the age of 25, and

(ii)the trusts secure that the conditions in subsection (6) below are met.

(4)From the time when the property ceases to be property to which section 71 above applies, but subject to subsection (5) below, this section applies to the property (if it would not apply to the property by virtue of subsection (1) above) for so long as—

(a)the property continues to be settled property held on trusts such as are mentioned in subsection (3)(b)(i) above, and

(b)the trusts continue to secure that the conditions in subsection (6) below are met.

(5)This section does not apply—

(a)to property to which section 71A above applies,

(b)to property to which section 71 above, or section 89 below, applies, or

(c)to settled property if a person is beneficially entitled to an interest in possession in the settled property and—

(i)the person became beneficially entitled to the interest in possession before 22nd March 2006, or

(ii)the interest in possession is an immediate post-death interest, or a transitional serial interest, and the person became beneficially entitled to it on or after 22nd March 2006.

(6)Those conditions are—

(a)that the person mentioned in subsection (1)(a) or (3)(b)(i) above (“B”), if he has not done so before attaining the age of 25, will on attaining that age become absolutely entitled to—

(i)the settled property,

(ii)any income arising from it, and

(iii)any income that has arisen from the property held on the trusts for his benefit and been accumulated before that time,

(b)that, for so long as B is living and under the age of 25, if any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of B, and

(c)that, for so long as B is living and under the age of 25, either—

(i)B is entitled to all of the income (if there is any) arising from any of the settled property, or

(ii)no such income may be applied for the benefit of any other person.

(7)For the purposes of this section, trusts are not to be treated as failing to secure that the conditions in subsection (6) above are met by reason only of—

(a)the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(b)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(c)the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(d)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(e)the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (a) to (d) above.

(8)In this section “the Criminal Injuries Compensation Scheme” means—

(a)the schemes established by arrangements made under the Criminal Injuries Compensation Act 1995,

(b)arrangements made by the Secretary of State for compensation for criminal injuries in operation before the commencement of those schemes, and

(c)the scheme established under the Criminal Injuries Compensation (Northern Ireland) Order 2002.

(9)The preceding provisions of this section apply in relation to Scotland—

(a)as if, in subsection (2) above, before “which” there were inserted the purposes of, and

(b)as if, in subsections (3)(b)(ii) and (4)(b) above, before “trusts” there were inserted purposes of the.

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Amendments (Textual)

71ECharge to tax on property to which section 71D appliesE+W+S+N.I.

(1)Subject to subsections (2) to (4) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which section 71D above applies, or

(b)in a case where paragraph (a) above does not apply, where the trustees make a disposition as a result of which the value of the settled property to which section 71D above applies is less than it would be but for the disposition.

(2)Tax is not charged under this section where settled property ceases to be property to which section 71D above applies as a result of—

(a)B becoming, at or under the age of 18, absolutely entitled as mentioned in section 71D(6)(a) above,

(b)the death, under the age of 18, of B,

(c)becoming, at a time when B is living and under the age of 18, property to which section 71A above applies, or

(d)being paid or applied for the advancement or benefit of B—

(i)at a time when B is living and under the age of 18, or

(ii)on B's attaining the age of 18.

(3)Tax is not charged under this section in respect of—

(a)a payment of costs or expenses (so far as they are fairly attributable to property to which section 71D above applies), or

(b)a payment which is (or will be) income of any person for any of the purposes of income tax or would for any of those purposes be income of a person not resident in the United Kingdom if he were so resident,

or in respect of a liability to make such a payment.

(4)Tax is not charged under this section by virtue of subsection (1)(b) above if the disposition is such that, were the trustees beneficially entitled to the settled property, section 10 or section 16 above would prevent the disposition from being a transfer of value.

(5)For the purposes of this section the trustees shall be treated as making a disposition if they omit to exercise a right (unless it is shown that the omission was not deliberate) and the disposition shall be treated as made at the time or latest time when they could have exercised the right.

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Amendments (Textual)

71FCalculation of tax charged under section 71E in certain casesE+W+S+N.I.

(1)Where—

(a)tax is charged under section 71E above by reason of the happening of an event within subsection (2) below, and

(b)that event happens after B has attained the age of 18,

the tax is calculated in accordance with this section.

(2)Those events are—

(a)B becoming absolutely entitled as mentioned in section 71D(6)(a) above,

(b)the death of B, and

(c)property being paid or applied for the advancement or benefit of B.

(3)The amount of the tax is given by—

(4)For the purposes of subsection (3) above, the “Chargeable amount” is—

(a)the amount by which the value of property which is comprised in the settlement and to which section 71D above applies is less immediately after the event giving rise to the charge than it would be but for the event, or

(b)where the tax is payable out of settled property to which section 71D above applies immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

(5)For the purposes of subsection (3) above, the “Relevant fraction” is three tenths multiplied by so many fortieths as there are complete successive quarters in the period—

(a)beginning with the day on which B attained the age of 18 or, if later, the day on which the property became property to which section 71D above applies, and

(b)ending with the day before the occasion of the charge.

(6)Where the whole or part of the Chargeable amount is attributable to property that was excluded property at any time during the period mentioned in subsection (5) above then, in determining the “Relevant fraction” in relation to that amount or part, no quarter throughout which that property was excluded property shall be counted.

(7)For the purposes of subsection (3) above, the “Settlement rate” is the effective rate (that is to say, the rate found by expressing the tax chargeable as a percentage of the amount on which it is charged) at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (8) below.

(8)The chargeable transfer postulated in subsection (7) above is one—

(a)the value transferred by which is equal to an amount determined in accordance with subsection (9) below,

(b)which is made at the time of the charge to tax under section 71E above by a transferor who has in the period of seven years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to that of any chargeable transfers made by the settlor in the period of seven years ending with the day on which the settlement commenced, disregarding transfers made on that day, and

(c)on which tax is charged in accordance with section 7(2) above.

(9)The amount referred to in subsection (8)(a) above is equal to the aggregate of—

(a)the value, immediately after the settlement commenced, of the property then comprised in it,

(b)the value, immediately afer a related settlement commenced, of the property then comprised in it, and

(c)the value, immediately after it became comprised in the settlement, of any property which became so comprised after the settlement commenced and before the occasion of the charge under section 71E above (whether or not it has remained so comprised).

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Amendments (Textual)

71GCalculation of tax charged under section 71E in all other casesE+W+S+N.I.

(1)Where—

(a)tax is charged under section 71E above, and

(b)the tax does not fall to be calculated in accordance with section 71F above,

the tax is calculated in accordance with this section.

(2)The amount on which the tax is charged is—

(a)the amount by which the value of property which is comprised in the settlement and to which section 71D above applies is less immediately after the event giving rise to the charge than it would be but for the event, or

(b)where the tax is payable out of settled property to which section 71D above applies immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

(3)The rate at which the tax is charged is the rate that would be given by subsections (6) to (8) of section 70 above—

(a)if the reference to section 70 above in subsection (8)(a) of that section were a reference to section 71D above,

(b)if the other references in those subsections to section 70 above were references to section 71E above, and

(c)if, for the purposes of section 70(8) above, property—

(i)which is property to which section 71D above applies,

(ii)which, immediately before it became property to which section 71D above applies, was property to which section 71 applied, and

(iii)which ceased on that occasion to be property to which section 71 above applied without ceasing to be settled property,

had become property to which section 71D above applies not on that occasion but on the occasion (or last occasion) before then when it became property to which section 71 above applied.

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Amendments (Textual)

71HSections 71A to 71G: meaning of “parent”E+W+S+N.I.

(1)In sections 71A to 71G above “parent” includes step-parent.

(2)For the purposes of sections 71A to 71G above, a deceased individual (“D”) shall be taken to have been a parent of another individual (“Y”) if, immediately before D died, D had—

(a)parental responsibility for Y under the law of England and Wales,

(b)parental responsibilities in relation to Y under the law of Scotland, or

(c)parental responsibility for Y under the law of Northern Ireland.

(3)In subsection (2)(a) above “parental responsibility” has the same meaning as in the Children Act 1989.

(4)In subsection (2)(b) above “parental responsibilities” has the meaning given by section 1(3) of the Children (Scotland) Act 1995.

(5)In subsection (2)(c) above “parental responsibility” has the same meaning as in the Children (Northern Ireland) Order 1995.]

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Amendments (Textual)

72 Property leaving employee trusts and newspaper trusts.E+W+S+N.I.

(1)This section applies to settled property to which section 86 below applies [F199 if—

(a)no interest in possession subsists in it to which an individual is beneficially entitled, and

(b)no company-purchased interest in possession subsists in it.] .

[F200(1A)For the purposes of subsection (1)(b) above, an interest in possession is “company-purchased” if—

(a)a company is beneficially entitled to the interest in possession,

(b)the business of the company consists wholly or mainly in the acquisition of interests in settled property, and

(c)the company has acquired the interest in possession for full consideration in money or money's worth from an individual who was beneficially entitled to it.

(1B)Section 59(3) and (4) above apply for the purposes of subsection (1A)(c) above as for those of section 59(2)(b) above, but as if the references to the condition set out in section 59(2)(a) above were to the condition set out in subsection (1A)(b) above.]

(2)Subject to subsections (4) [F201, (4A)] and (5) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property, and

(b)where a payment is made out of settled property to which this section applies for the benefit of a person within subsection (3) below, or a person connected with such a person, and

(c)in a case which paragraphs (a) and (b) above do not apply, where the trustees make a disposition (otherwise than by way of a payment out of the settled property) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3)A person is within this subsection if—

(a)he has directly or indirectly provided any of the settled property otherwise than by additions not exceeding in value £1,000 in any one year; or

(b)in a case where the employment in question is employment by a close company, he is a participator in relation to that company and either—

(i)is beneficially entitled to, or to rights entitling him to acquire, not less than 5 per cent. of, or of any class of the shares comprised in, its issued share capital, or

(ii)would, on a winding-up of the company, be entitled to not less than 5 per cent. of its assets; or

(c)he has acquired an interest in the settled property for a consideration in money or money’s worth.

(4)If the trusts are those of a profit sharing scheme approved in accordance with Schedule 9 to the [F202Taxes Act 1988], tax shall not be chargeable under this section by virtue of subsection (3)(b) above on an appropriation of shares in pursuance of the scheme.

[F203(4A)If the trusts are those of [F204a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003] , tax shall not be chargeable under this section by virtue of subsection (3)(b) above on an appropriation of shares to, or acquisition of shares on behalf of, an individual under the plan.]

(5)Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section (with the substitution of a reference to subsection (2)(c) above for the reference in section 70(4) to section 70(2)(b)).

(6)In this section—

(a)close company” and “participator” have the same meanings as in Part IV of this Act; and

(b)year” means the period beginning with 26th March 1974 and ending with 5th April 1974, and any subsequent period of twelve months ending with 5th April;

and a person shall be treated for the purposes of this section as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that interest or of other property.

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Amendments (Textual)

F199Words in s. 72(1) substituted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 7, 21(2)

F201Word in s. 72(2) inserted (28.7.2000) by 2000 c. 17, s. 138(3)(a)

F202 Substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“Finance Act 1978”.

F203S. 72(4A) inserted (28.7.2000) by 2000 c. 17, s. 138(3)(b)

F204Words in s. 72(4A) substituted (with effect as mentioned in s. 723(1)(a)(b) (subject to Sch. 7) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), ss. 722, 723(1), Sch. 6 para. 151(1)(b)(2)

73 Pre-1978 protective trusts.E+W+S+N.I.

(1)This section applies to settled property which is held on trusts to the like effect as those specified in section 33(1)(ii) of the M18Trustee Act 1925 and which became held on those trusts on the failure or determination before 12th April 1978 of trusts to the like effect as those specified in section 33(1)(i).

(2)Subject to subsection (3) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property for the benefit of the principal beneficiary within the meaning of section 33 of the Trustee Act 1925, and

(b)in a case which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by way of such a payment) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3)Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section.

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Marginal Citations

74 Pre-1981 trusts for disabled persons.E+W+S+N.I.

(1)This section applies to settled property transferred into settlement before 10th March 1981 and held on trusts under which, during the life of a disabled person, no interest in possession in the settled property subsists, and which secure that any of the settled property which is applied during his life is applied only or mainly for his benefit.

(2)Subject to subsection (3) below, there shall be a charge to tax under this section—

(a)where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property for the benefit of the person mentioned in subsection (1) above, and

(b)in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by way of such a payment) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3)Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section.

(4)In this section “disabled person” means a person who—

(a)is by reason of mental disorder (within the meaning of the M19Mental Health Act 1983) incapable of administering his property or managing his affairs, or

(b)is in receipt of an attendance allowance under section [F20564 of the Social Security Contributions and Benefits Act 1992 or][F206section 64 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992].

[F207, or

(c)is in receipt of a disability living allowance under section [F20571 of the Social Security Contributions and Benefits Act 1992][F208or [F206section 71 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992]]by virtue of entitlement to the care component at the highest or middle rate.]

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Amendments (Textual)

F208Words in s. 74(4)(c) inserted (6.4.1992) by S.I. 1991/2874, art. 4(2); S.R. 1992/94, art. 2.

Marginal Citations

Special cases—reliefsE+W+S+N.I.

75 Property becoming subject to employee trusts.E+W+S+N.I.

(1)Tax shall not be charged under section 65 above in respect of shares in or securities of a company which cease to be relevant property on becoming held on trusts of the description specified in section 86(1) below if the conditions in subsection (2) below are satisfied.

(2)The conditions referred to in subsection (1) above are—

(a)that the persons for whose benefit the trusts permit the settled property to be applied include all or most of the persons employed by or holding office with the company;

(b)that, at the date when the shares or securities cease to be relevant property or at a subsequent date not more than one year thereafter, both the conditions mentioned in subsection (2) of section 28 above (read with subsections (3) and (7)) are satisfied, without taking account of shares or securities held on other trusts; and

(c)that the trusts do not permit any of the property to be applied at any time (whether during any such period as is referred to in section 86(1) below or later) for the benefit of any of the persons mentioned in subsection (4) of section 28 above (read with subsections (5) to (7)) or for the benefit of the settlor or of any person connected with him.

(3)In its application for the purposes of subsection (2)(c) above, section 28(4) shall be construed as if—

(a)references to section 28(1) were references to subsection (2) above, and

(b)references to the time of the transfer of value were references to the time when the property ceases to be relevant property.

76 Property becoming held for charitable purposes, etc.E+W+S+N.I.

(1)Tax shall not be charged under this Chapter (apart from section 79 below) in respect of property which ceases to be relevant property, or ceases to be property to which section 70, 71, [F20971A, 71D,] 72, 73 or 74 above or paragraph 8 of Schedule 4 to this Act applies, on becoming—

(a)property held for charitable purposes only without limit of time (defined by a date or otherwise);

(b)the property of a political party qualifying for exemption under section 24 above; [F210or]

(c)the property of a body within Schedule 3 to this Act;. . .

F211(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F212(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)If the amount on which tax would be charged apart from this section in respect of any property exceeds the value of the property immediately after it becomes property of a description specified in paragraphs (a) [F213to (c)] of subsection (1) above (less the amount of any consideration for its transfer received by the trustees), that subsection shall not apply but the amount on which tax is charged shall be equal to the excess.

(4)The reference in subsection (3) above to the amount on which tax would be charged is a reference to the amount on which it would be charged—

(a)assuming (if it is not in fact so) that the tax is not paid out of settled property, and

(b)apart from Chapters I and II of Part V of this Act;

and the reference in that subsection to the amount on which tax is charged is a reference to the amount on which it would be charged on that assumption and apart from those Chapters.

(5)Subsection (1) above shall not apply in relation to any property if the disposition by which it becomes property of the relevant description is defeasible; but for this purpose a disposition which has not been defeated at a time twelve months after the property concerned becomes property of the relevant description and is not defeasible after that time shall be treated as not being defeasible, whether or not it was capable of being defeated before that time.

(6)Subsection (1) above shall not apply in relation to any property if it or any part of it may become applicable for purposes other than charitable purposes or purposes of a body mentioned in subsection (1)(b), [F214or (c)] above.

(7)Subsection (1) shall not apply in relation to any property if, at or before the time when it becomes property of the relevant description, an interest under the settlement is or has been acquired for a consideration in money or money’s worth by an exempt body otherwise than from a charity or a body mentioned in subsection (1)(b) or (c) above.

(8)In subsection (7) above “exempt body” means a charity or a body mentioned in subsection (1)(b), [F214or (c)] above; and for the purposes of subsection (7) above a body shall be treated as acquiring an interest for a consideration in money or money’s worth if it becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to that body or to another person) of that interest or of other property.

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Amendments (Textual)

F209Words in s. 76(1) inserted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 7, 22

F210Word in s. 76(1)(b) inserted (31.7.1998 with effect as mentioned in s. 143(5) of the amending Act) by 1998 c. 36, s. 143(4)(a)

F211S. 76(1)(d) and word “or”immediately preceding repealed (31.7.1998 with effect as mentioned in s. 143(5) of the amending Act) by 1998 c. 36, ss. 143(4)(a), 165, Sch. 27 Pt. IV note 1

F212S. 76(2) repealed (31.7.1998 with effect as mentioned in s. 143(5) of the amending Act) by 1998 c. 36, ss. 143(4)(a), 165, Sch. 27 Pt. IV note 1

F213Words in s. 76(3) substituted (31.7.1998 with effect as mentioned in s. 143(5) of the amending Act) by 1998 c. 36, s. 143(4)(b)

F214Words in s. 76(6)(8) substituted (31.7.1998 with effect as mentioned in s. 143(5) of the amending Act) by 1998 c. 36, s. 143(4)(c)

Works of art, historic buildings, etc.E+W+S+N.I.

77 Maintenance funds for historic buildings, etc.E+W+S+N.I.

Schedule 4 to this Act shall have effect.

78 Conditionally exempt occasions. E+W+S+N.I.

(1)A transfer of property or other event shall not constitute an occasion on which tax is chargeable under any provision of this Chapter other than section 64 if the property in respect of which the charge would have been made has been comprised in the settlement throughout the six years ending with the transfer or event, and—

(a)the property is, on a claim made for the purpose, designated by the Treasury under section 31 above, and

(b)the requisite undertaking described in that section is given with respect to the property by such person as the Treasury think appropriate in the circumstances of the case [F215or (where the property is an area of land within subsection (1)(d) of that section) the requisite undertakings described in that section are given with respect to the property by such person or persons as the Treasury think appropriate in the circumstances of the case.]

[F216(1A)A claim under subsection (1) above must be made no more than two years after the date of the transfer or other event in question or within such longer period as the Board may allow.]

(2)References in this Chapter to a conditionally exempt occasion are to—

(a)a transfer or event which by virtue of subsection (1) above does not constitute an occasion on which tax is chargeable under this Chapter;

(b)a transfer or event which, by virtue of section 81(1) of the M20Finance Act 1976, did not constitute an occasion on which tax was chargeable under Chapter II of Part IV of the M21Finance Act 1982;

(c)a conditionally exempt distribution within the meaning given by section 81(2) of the Finance Act 1976 as it had effect in relation to events before 9th March 1982.

(3)Where there has been a conditionally exempt occasion in respect of any property, sections 32, [F21732A], 33(1), 33(3) to (7) and 35(2) above shall have effect (and tax shall accordingly be chargeable under section 32 [F217or 32A]) as if—

(a)references to a conditionally exempt transfer and to such a transfer of property included references respectively to a conditionally exempt occasion and to such an occasion in respect of property;

(b)references to a disposal otherwise than by sale included references to any occasion on which tax is chargeable under any provision of this Chapter other than section 64;

(c)references to an undertaking given under section 30 above included references to an undertaking given under this section;

and the references in section 33(5) above to the person who made a conditionally exempt transfer shall have effect in relation to a conditionally exempt occasion as references to the person who is the settlor of the settlement in respect of which the occasion occurred (or if there is more than one such person, whichever of them the Board may select).

(4)Where by virtue of subsection (3) above the relevant person for the purposes of section 33 above is the settlor of a settlement, the rate (or each of the rates) mentioned in section 33(1)(b)(i) or (ii)—

(a)shall, if the occasion occurred before the first ten-year anniversary to fall after the property became comprised in the settlement concerned, be 30 per cent. of what it would be apart from this subsection, and

(b)shall, if the occasion occurred after the first and before the second ten-year anniversary to fall after the property became so comprised, be 60 per cent. of what it would be apart from this subsection;

[F218and the appropriate provision of section 7 for the purposes of section 33(1)(b)(ii) is, if the settlement was created on his death, subsection (1) and, if not, subsection (2).]

(5)Where by virtue of subsection (3) above the relevant person for the purposes of section 33 above is the settlor of a settlement and that settlor died before 13th March 1975, section 33(1)(b) above shall have effect (subject to subsection (4) above) with the substitution for sub-paragraph (ii) of the following sub-paragraph:—

(ii)the rate or rates that would have applied to that amount (“the chargeable amount”) [F219in accordance with the appropriate provision of section 7 above] if the relevant person had died when the chargeable event occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been added to that value and had formed the highest part of it.

(6)Section 34 above shall not apply to a chargeable event in respect of property if the last conditionally exempt transfer of the property has been followed by a conditionally exempt occasion in respect of it.

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Amendments (Textual)

F215Finance Act 1985 Sch. 26 para. 8(a),in relation to events occurring after 18March 1985.

F216S. 78(1A) inserted (31.7.1998 with effect in relation to transfers of property made, and other events occurring, on or after 17.3.1998) by 1998 c. 36, s. 142, Sch. 25 para. 3(1)(2)

F217Finance Act 1985 Sch. 26 para. 8(b),in relation to events occurring after 18March 1985.

F218Finance Act 1986 Sch. 19 para. 19(1),with effect from 18March 1986.Originally

“and the appropriate Table for the purposes of section 33(1)(b)(ii) is, if the settlement was created on his death, the first Table in Schedule 1 to this Act and, if not, the second Table.”

F219Finance Act 1986 Sch. 19 para. 19(2),with effect from 18March 1986.Originally

“under the appropriate Table”.

Modifications etc. (not altering text)

C29 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

Marginal Citations

79 Exemption from ten-yearly charge.E+W+S+N.I.

(1)Where property is comprised in a settlement and there has been a conditionally exempt transfer of the property on or before the occasion on which it became comprised in the settlement, section 64 above shall not have effect in relation to the property on any ten-year anniversary falling before the first occurrence after the transfer of a chargeable event with respect to the property.

(2)Where property is comprised in a settlement and there has been, on or before the occasion on which it became comprised in the settlement, a disposal of the property in relation to which subsection (4) of section [F220258 of the 1992 Act] (capital gains tax relief for works of art etc.) had effect, section 64 above shall not have effect in relation to the property on any ten-year anniversary falling before the first occurrence after the disposal of an event on the happening of which the property is treated as sold under subsection (5) of the said section [F220258].

(3)Where property is comprised in a settlement and there has been no such transfer or disposal of the property as is mentioned in subsection (1) or (2) above on or before the occasion on which it became comprised in the settlement, then, if—

(a)the property has, on a claim made for the purpose, been designated by the Treasury under section 31 above,

(b)the requisite undertaking described in that section has been given [F221with respect to the property] by such person as the Treasury think appropriate in the circumstances of the case, [F221or (where the property is an area of land within subsection (1)(d) of that section) the requisite undertakings described in that section have been given with respect to the property by such person or persons as the Treasury think appropriate in the circumstances of the case], and

(c)the property is relevant property,

section 64 above shall not have effect in relation to the property; but there shall be a charge to tax under this subsection on the first occurrence of an event which, if there had been a conditionally exempt transfer of the property when the claim was made and the undertaking had been given under section 30 above, would be a chargeable event with respect to the property.

(4)Tax shall not be charged under subsection (3) above in respect of property if, after the occasion and before the occurrence there mentioned, there has been a conditionally exempt occasion in respect of the property.

(5)The amount on which tax is charged under subsection (3) above shall be an amount equal to the value of the property at the time of the event.

[F222(5A)Where the event giving rise to a charge to tax under subsection (3) above is a disposal on sale, and the sale—

(a)was not intended to confer any gratuitous benefit on any person, and

(b)was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other,

the value of the property at the time of that event shall be taken for the purposes of subsection (5) above to be equal to the proceeds of the sale.]

(6)The rate at which tax is charged under subsection (3) above shall be the aggregate of the following percentages—

(a)0·25 per cent. for each of the first forty complete successive quarters in the relevant period,

(b)0·20 per cent. for each of the next forty,

(c)0·15 per cent. for each of the next forty,

(d)0·10 per cent. for each of the next forty, and

(e)0·5 per cent. for each of the next forty.

[F223(7)In subsection (6) above “the relevant period” means the period given by subsection (7A) below or, if shorter, the period given by subsection (7B) below.

(7A)The period given by this subsection is the period beginning with the latest of—

(a)the day on which the settlement commenced,

(b)the date of the last ten-year anniversary of the settlement to fall before the day on which the property became comprised in the settlement,

(c)the date of the last ten-year anniversary of the settlement to fall before the day on which the property was designated under section 31 above on a claim under this section, and

(d)13th March 1975,

and ending with the day before the event giving rise to the charge.

(7B)The period given by this subsection is the period equal in length to the number of relevant-property days in the period—

(a)beginning with the day that is the latest of those referred to in paragraphs (a) to (d) of subsection (7A) above, and

(b)ending with the day before the event giving rise to the charge.

(7C)For the purposes of subsection (7B) above, a day is a “relevant-property day” if at any time on that day the property was relevant property.]

(8)Subsection (9) below shall have effect where—

(a)by virtue of subsection (3) above, section 64 does not have effect in relation to property on the first ten-year anniversary of the settlement to fall after the making of the claim and the giving of the undertaking,

(b)on that anniversary a charge to tax falls to be made in respect of the settlement under section 64, and

(c)the property became comprised in the settlement, and the claim was made and the undertaking was given, within the period of ten years ending with that anniversary.

[F224(9A)Subsection (9B) below applies where the same event gives rise—

(a)to a charge under subsection (3) above in relation to any property, and

(b)to a charge under section 32 or 32A above in relation to that property.

(9B)If the amount of each of the charges is the same, each charge shall have effect as a charge for one half of the amount that would be charged apart from this subsection; otherwise, whichever of the charges is lower in amount shall have effect as if it were a charge the amount of which is nil.]

(9)In calculating the rate at which tax is charged under section 64 above, the value of the consideration given for the property on its becoming comprised in the settlement shall be treated for the purposes of section 66(5)(b) above as if it were an amount on which a charge to tax was imposed in respect of the settlement under section 65 above at the time of the property becoming so comprised.

(10)In subsection (1) above, the reference to a conditionally exempt transfer of any property includes a reference to a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the M22Finance Act 1975 and, in relation to such property, the reference to a chargeable event includes a reference to an event on the occurrence of which tax becomes chargeable under Schedule 5 to this Act.

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Amendments (Textual)

F220Words in s. 79(2) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the substituting Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289 , 290, Sch. 10 para. 8(3) (with ss. 60, 101(1), 201(3)).

F221Finance Act 1985 Sch. 26 para. 9,in relation to events occurring after 18March 1985.

F223S. 79(7)-(7C) substituted for s. 79(7) (19.7.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 34(3)

Modifications etc. (not altering text)

C30 By Finance Act 1985 s. 95,the functions of the Treasury were transferred to the Commissioners of Inland Revenue (“the Board”).

Marginal Citations

[F22579A Variation of undertakings.E+W+S+N.I.

(1)An undertaking given under section 78 or 79 above may be varied from time to time by agreement between the Board and the person bound by the undertaking.

(2)Where a Special Commissioner is satisfied that—

(a)the Board have made a proposal for the variation of such an undertaking to the person bound by the undertaking,

(b)that person has failed to agree to the proposed variation within six months after the date on which the proposal was made, and

(c)it is just and reasonable, in all the circumstances, to require the proposed variation to be made,

the Commissioner may direct that the undertaking is to have effect from a date specified by him as if the proposed variation had been agreed to by the person bound by the undertaking.

(3)The date specified by the Special Commissioner must not be less than sixty days after the date of his direction.

(4)A direction under this section shall not take effect if, before the date specified by the Special Commissioner, a variation different from that to which the direction relates is agreed between the Board and the person bound by the undertaking.]

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Amendments (Textual)

F225S. 79A inserted (31.7.1998 with effect as mentioned in Sch. 25 para. 8(4) of the amending Act) by 1998 c. 36, s. 142, Sch. 25 para. 8(2)

MiscellaneousE+W+S+N.I.

80 Initial interest of settlor or spouse [F226or civil partner].E+W+S+N.I.

(1)Where a settlor or his spouse [F227or civil partner] is beneficially entitled to an interest in possession in property immediately after it becomes comprised in the settlement, the property shall for the purposes of this Chapter be treated as not having become comprised in the settlement on that occasion; but when the property or any part of it becomes held on trusts under which neither of those persons is beneficially entitled to an interest in possession, the property or part shall for those purposes be treated as becoming comprised in a separate settlement made by that one of them who ceased (or last ceased) to be beneficially entitled to an interest in possession in it.

(2)References in subsection (1) above to the spouse [F228or civil partner] of a settlor include references to the widow or widower [F229or surviving civil partner] of a settlor.

(3)This section shall not apply if the occasion first referred to in subsection (1) above occurred before 27th March 1974.

[F230(4)Where the occasion first referred to in subsection (1) above occurs on or after 22nd March 2006, this section applies—

(a)as though for “an interest in possession” in each place where that appears in subsection (1) above there were substituted a postponing interest, and

(b)as though, for the purposes of that subsection, each of the following were a “postponing interest”—

(i)an immediate post-death interest;

(ii)a disabled person's interest.]

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Amendments (Textual)

81 Property moving between settlements.E+W+S+N.I.

(1)Where property which ceases to be comprised in one settlement becomes comprised in another then, unless in the meantime any person becomes beneficially entitled to the property (and not merely to an interest in possession in the property), it shall for the purposes of this Chapter be treated as remaining comprised in the first settlement.

(2)Subsection (1) above shall not apply where the property ceased to be comprised in the first settlement before 10th December 1981; but where property ceased to be comprised in one settlement before 10th December 1981 and after 26th March 1974 and, by the same disposition, became comprised in another settlement, it shall for the purposes of this Chapter be treated as remaining comprised in the first settlement.

(3)Subsection (1) above shall not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the other settlement before 10th December 1981.

82 Excluded property.E+W+S+N.I.

(1)For the purposes of this Chapter (except sections 78 and 79) property to which section 80 or 81 above applies shall not be taken to be excluded property by virtue of section 48(3)(a) above unless the condition in subsection (3) below is satisfied (in addition to the conditions in section 48(3) that the property is situated outside the United Kingdom and that the settlor was not domiciled there when the settlement was made).

(2)Section 65(8) above shall not have effect in relation to property to which section 80 or 81 applies unless the condition in subsection (3) below is satisfied (in addition to the condition in section 65(8) that the settlor was not domiciled in the United Kingdom when the settlement was made).

(3)The condition referred to in subsections (1) and (2) above is—

(a)in the case of property to which section 80 above applies, that the person who is the settlor in relation to the settlement first mentioned in that section, and

(b)in the case of property to which subsection (1) or (2) of section 81 above applies, that the person who is the settlor in relation to the second of the settlements mentioned in the subsection concerned,

was not domiciled in the United Kingdom when that settlement was made.

83 Property becoming settled on a death.E+W+S+N.I.

Property which becomes comprised in a settlement in pursuance of a will or intestacy shall for the purposes of this Chapter be taken to have become comprised in it on the death of the testator or intestate (whether it occurred before or after the passing of this Act).

84 Income applied for charitable purposes.E+W+S+N.I.

For the purposes of this Chapter (except sections 78 and 79) where the trusts on which settled property is held require part of the income of the property to be applied for charitable purposes, a corresponding part of the settled property shall be regarded as held for charitable purposes.

85 Credit for annual charges under Finance Act 1975.E+W+S+N.I.

Any tax charged under paragraph 12(2) of Schedule 5 to the M23Finance Act 1975 and not already allowed as a credit under paragraph 12(3) of that Schedule or under section 125 of the M24Finance Act 1982 or under this section shall be allowed as a credit against tax chargeable under this Chapter (apart from section 79) in respect of the settled property or part concerned.

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Marginal Citations

CHAPTER IVE+W+S+N.I. MISCELLANEOUS

86 Trusts for benefit of employees.E+W+S+N.I.

(1)Where settled property is held on trusts which, either indefinitely or until the end of a period (whether defined by a date or in some other way) do not permit any of the settled property to be applied otherwise than for the benefit of—

(a)persons of a class defined by reference to employment in a particular trade or profession, or employment by, or office with, a body carrying on a trade, profession or undertaking, or

(b)persons of a class defined by reference to marriage [F231to or civil partnership with,] or relationship to, or dependence on, persons of a class defined as mentioned in paragraph (a) above,

then, subject to subsection (3) below, this section applies to that settled property or, as the case may be, applies to it during that period.

(2)Where settled property is held on trusts permitting the property to be applied for the benefit of persons within paragraph (a) or (b) of subsection (1) above, those trusts shall not be regarded as outside the description specified in that subsection by reason only that they also permit the settled property to be applied for charitable purposes.

(3)Where any class mentioned in subsection (1) above is defined by reference to employment by or office with a particular body, this section applies to the settled property only if—

(a)the class comprises all or most of the persons employed by or holding office with the body concerned, or

(b)the trusts on which the settled property is held are those of a profit sharing scheme approved in accordance with Schedule 9 to the M25[F232Taxes Act 1988]. [F233; or]

[(c)the trusts on which the settled property is held are those of [F234a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003] .]

(4)Where this section applies to any settled property—

(a)the property shall be treated as comprised in one settlement, whether or not it would fall to be so treated apart from this section, and

(b)an interest in possession in any part of the settled property shall be disregarded for the purposes of this Act (except section 55) if that part is less than 5 per cent. of the whole.

(5)Where any property to which this section applies ceases to be comprised in a settlement and, either immediately or not more than one month later, the whole of it becomes comprised in another settlement, then, if this section again applies to it when it becomes comprised in the second settlement, it shall be treated for all the purposes of this Act as if it had remained comprised in the first settlement.

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Amendments (Textual)

F232 Substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“Finance Act 1978”.

F233S. 86(3)(c) and the word “or”immediately preceding it inserted (28.7.2000) by 2000 c. 17, s. 138(4)

F234Words in s. 86(3)(c) substituted (with effect as mentioned in s. 723(1)(a)(b) (subject to Sch. 7) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), ss. 722, 723(1), Sch. 6 para. 151(1)(c)(2)

Marginal Citations

87 Newspaper trusts.E+W+S+N.I.

(1)In relation to property comprised in a settlement to which this section applies, section 86 above shall have effect as if newspaper publishing companies were included among the persons within paragraphs (a) and (b) of subsection (1) of that section.

(2)This section applies to a settlement if shares in a newspaper publishing company or a newspaper holding company are the only or principal property comprised in the settlement.

(3)In this section—

  • newspaper publishing company” means a company whose business consists wholly or mainly in the publication of newspapers in the United Kingdom;

  • newspaper holding company” means a company which—

    (a)

    has as its only or principal asset shares in a newspaper publishing company, and

    (b)

    has powers of voting on all or most questions affecting the publishing company as a whole which if exercised would yield a majority of the votes capable of being exercised on them;

    and for the purposes of this section shares shall be treated as the principal property comprised in a settlement or the principal asset of a company if the remaining property comprised in the settlement or the remaining assets of the company are such as may be reasonably required to enable the trustees or the company to secure the operation of the newspaper publishing company concerned.

88 Protective trusts.E+W+S+N.I.

(1)This section applies to settled property (other than property to which section 73 above applies) which is held on trusts to the like effect as those specified in section 33(1) of the M26Trustee Act 1925; and in this section “the principal beneficiary” and “the trust period” have the same meanings as in that section.

(2)For the purposes of this Act—

(a)there shall be disregarded the failure or determination, before the end of the trust period, of trusts to the like effect as those specified in paragraph (i) of the said section 33(1), and

(b)the principal beneficiary shall be treated as beneficially entitled to an interest in possession in any property which is for the time being held on trusts to the like effect as those specified in paragraph (ii) of the said section 33(1).

[F235(3)Where—

(a)settled property became held before 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925, and

(b)as a result of the failure or determination of those trusts on or after 22nd March 2006, the principal beneficiary is treated by subsection (2)(b) above as beneficially entitled to an interest in possession,

this Act shall apply in relation to that interest in possession as if the principal beneficiary became beneficially entitled to that interest in possession before 22nd March 2006.

(4)Subsection (5) below applies where—

(a)settled property becomes held on or after 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925,

(b)the interest of the principal beneficiary under those trusts is—

(i)an immediate post-death interest,

(ii)a disabled person's interest within section 89B(1)(c) or (d) below, or

(iii)a transitional serial interest, and

(c)as a result of the failure or determination of those trusts, the principal beneficiary is treated by subsection (2)(b) above as beneficially entitled to an interest in possession.

(5)This Act shall apply—

(a)as if that interest in possession were a continuation of the immediate post-death interest, disabled person's interest or transitional serial interest, and

(b)as if the immediate post-death interest, or disabled person's interest or transitional serial interest, had not come to an end on the failure or determination of the trusts.

(6)Subsection (2) above does not apply in a case where—

(a)settled property becomes held on or after 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925, and

(b)the interest of the principal beneficiary under those trusts is—

(i)not an immediate post-death interest,

(ii)not a disabled person's interest within section 89B(1)(c) or (d) below, and

(iii)not a transitional serial interest.]

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Amendments (Textual)

Marginal Citations

89 Trusts for disabled persons.E+W+S+N.I.

(1)This section applies to settled property transferred into settlement after 9th March 1981 and held on trusts—

(a)under which, during the life of a disabled person, no interest in possession in the settled property subsists, and

(b)which secure that not less than half of the settled property which is applied during his life is applied for his benefit.

(2)For the purposes of this Act the person mentioned in subsection (1) above shall be treated as beneficially entitled to an interest in possession in the settled property.

(3)The trusts on which settled property is held shall not be treated as falling outside subsection (1) above by reason only of the powers conferred on the trustees by section 32 of the Trustee Act 1925 or section 33 of the M27Trustee Act (Northern Ireland) 1958 (powers of advancement).

(4)The reference in subsection (1) above to a disabled person is, in relation to any settled property, a reference to a person who, when the property was transferred into settlement, was—

(a)incapable, by reason of mental disorder within the meaning of the M28Mental Health Act 1983, of administering his property or managing his affairs, or

(b)in receipt of an attendance allowance under [F23664 of the Social Security Contributions and Benefits Act 1992 or][F237section 64 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992]. [F238, or

(c)in receipt of a disability living allowance under section [F23671 of the Social Security Contributions and Benefits Act 1992][F239or [F237section 71 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992]]by virtue of entitlement to the care component at the highest or middle rate.]

[F240(5)The reference in subsection (1) above to a disabled person includes, in relation to any settled property, a reference to a person who, when the property was transferred into settlement,—

(a)would have been in receipt of attendance allowance under section 64 of either of the Acts mentioned in subsection (4)(b) above had provision made by regulations under section 67(1) or (2) of that Act (non-satisfaction of conditions for attendance allowance where person is undergoing treatment for renal failure in a hospital or is provided with certain accommodation) been ignored, or

(b)would have been in receipt of disability living allowance by virtue of entitlement to the care component at the highest or middle rate had provision made by regulations under section 72(8) of either of the Acts mentioned in subsection (4)(c) above (no payment of disability living allowance for persons for whom certain accommodation is provided) been ignored.

(6)The reference in subsection (1) above to a disabled person also includes, in relation to any settled property, a reference to a person who satisfies the Commissioners for Her Majesty's Revenue and Customs—

(a)that he would, when the property was transferred into settlement, have been in receipt of attendance allowance under section 64 of either of the Acts mentioned in subsection (4)(b) above—

(i)had he met the conditions as to residence under section 64(1) of that Act, and

(ii)had provision made by regulations under section 67(1) or (2) of that Act been ignored, or

(b)that he would, when the property was transferred into settlement, have been in receipt of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate—

(i)had he met the prescribed conditions as to residence under section 71(6) of either of the Acts mentioned in subsection (4)(c) above, and

(ii)had provision made by regulations under section 72(8) of that Act been ignored.]

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Amendments (Textual)

F239Words in s. 89(4)(c) inserted (6.4.1992) by S.I. 1991/2874, art. 4(3); S.R. 1992/94, art 2.

F240S. 89(5)-(6) inserted (22.3.2006 for certain purposes) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 6(2)(4)

Marginal Citations

[F24189ASelf-settlement by person with condition expected to lead to disabilityE+W+S+N.I.

(1)This section applies to property transferred by a person (“A”) into settlement on or after 22nd March 2006 if—

(a)A was beneficially entitled to the property immediately before transferring it into settlement,

(b)A satisfies the Commissioners for Her Majesty's Revenue and Customs that, when the property was transferred into settlement, A had a condition that it was at that time reasonable to expect would have such effects on A as to lead to A becoming—

(i)a person falling within section 89(4)(a) above,

(ii)in receipt of an attendance allowance mentioned in section 89(4)(b) above, or

(iii)in receipt of a disability living allowance mentioned in section 89(4)(c) above by virtue of entitlement to the care component at the highest or middle rate, and

(c)the property is held on trusts—

(i)under which, during the life of A, no interest in possession in the settled property subsists, and

(ii)which secure that Conditions 1 and 2 are met.

(2)Condition 1 is that if any of the settled property is applied during A's life for the benefit of a beneficiary, it is applied for the benefit of A.

(3)Condition 2 is that any power to bring the trusts mentioned in subsection (1)(c) above to an end during A's life is such that, in the event of the power being exercised during A's life, either—

(a)A or another person will, on the trusts being brought to an end, be absolutely entitled to the settled property, or

(b)on the trusts being brought to an end, a disabled person's interest within section 89B(1)(a) or (c) below will subsist in the settled property.

(4)If this section applies to settled property transferred into settlement by a person, the person shall be treated as beneficially entitled to an interest in possession in the settled property.

(5)For the purposes of subsection (1)(b)(ii) above, assume—

(a)that A will meet the conditions as to residence under section 64(1) of whichever of the 1992 Acts is applicable, and

(b)that there will be no provision made by regulations under section 67(1) and (2) of that Act.

(6)For the purposes of subsection (1)(b)(iii) above, assume—

(a)that A will meet the prescribed conditions as to residence under section 71(6) of whichever of the 1992 Acts is applicable, and

(b)that there will be no provision made by regulations under section 72(8) of that Act.

(7)For the purposes of subsection (3) above, ignore—

(a)power to give directions as to the settled property that is exercisable jointly by the persons who between them are entitled to the entire beneficial interest in the property, and

(b)anything that could occur as a result of exercise of any such power.

(8)In this section “the 1992 Acts” means—

  • the Social Security Contributions and Benefits Act 1992, and

  • the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

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Amendments (Textual)

89BMeaning of “disabled person's interest”E+W+S+N.I.

(1)In this Act “disabled person's interest” means—

(a)an interest in possession to which a person is under section 89(2) above treated as beneficially entitled,

(b)an interest in possession to which a person is under section 89A(4) above treated as beneficially entitled,

(c)an interest in possession in settled property (other than an interest within paragraph (a) or (b) above) to which a disabled person becomes beneficially entitled on or after 22nd March 2006, or

(d)an interest in possession in settled property (other than an interest within paragraph (a) or (b) above) to which a person (“A”) is beneficially entitled if—

(i)A is the settlor,

(ii)A was beneficially entitled to the property immediately before transferring it into settlement,

(iii)A satisfies Her Majesty's Commissioners for Revenue and Customs as mentioned in section 89A(1)(b) above,

(iv)the settled property was transferred into settlement on or after 22nd March 2006, and

(v)the trusts on which the settled property is held secure that, if any of the settled property is applied during A's life for the benefit of a beneficiary, it is applied for the benefit of A.

(2)Subsections (4) to (6) of section 89 above (meaning of “disabled person” in subsection (1) of that section) have effect for the purposes of subsection (1)(c) above as they have effect for the purposes of subsection (1) of that section.

(3)Section 71D above does not apply to property in which there subsists a disabled person's interest within subsection (1)(c) above (but see also section 71D(5) above).]

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

90 Trustees’ annuities, etc.E+W+S+N.I.

Where under the terms of a settlement a person is entitled by way of remuneration for his services as trustee to an interest in possession in property comprised in the settlement, then, except to the extent that the interest represents more than a reasonable amount of remuneration,—

(a)the interest shall be left out of account in determining for the purposes of this Act the value of his estate immediately before his death, and

(b)tax shall not be charged under section 52 above when the interest comes to an end.

91 Administration period.E+W+S+N.I.

(1)Where a person would have been entitled to an interest in possession in the whole or part of the residue of the estate of a deceased person had the administration of that estate been completed, the same consequences shall follow under this Act as if he had become entitled to an interest in possession in the unadministered estate and in the property (if any) representing ascertained residue, or in a corresponding part of it, on the date as from which the whole or part of the income of the residue would have been attributable to his interest had the residue been ascertained immediately after the death of the deceased person.

(2)In this section—

(a)unadministered estate” means all the property for the time being held by personal representatives as such, excluding property devolving on them otherwise than as assets for the payment of debts and excluding property that is the subject of a specific disposition, and making due allowance for outstanding charges on residue and for any adjustments between capital and income remaining to be made in due course of administration;

(b)ascertained residue” means property which, having ceased to be held by the personal representatives as such, is held as part of the residue;

(c)charges on residue”, and “specific disposition” have the same meanings as in [F242Part XVI of The Taxes Act 1988] and the reference to the completion of the administration of an estate shall be construed as if contained in that Part.

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F242 Substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“Part XV of The Taxes Act”.

92 Survivorship clauses.E+W+S+N.I.

(1)Where under the terms of a will or otherwise property is held for any person on condition that he survives another for a specified period of not more than six months, this Act shall apply as if the dispositions taking effect at the end of the period or, if he does not survive until then, on his death (including any such disposition which has effect by operation of law or is a separate disposition of the income from the property) had had effect from the beginning of the period.

(2)Subsection (1) above does not affect the application of this Act in relation to any distribution or application of property occurring before the dispositions there mentioned take effect.

93 Disclaimers.E+W+S+N.I.

Where a person becomes entitled to an interest in settled property but disclaims the interest, then, if the disclaimer is not made for a consideration in money or money’s worth, this Act shall apply as if he had not become entitled to the interest.

PART IVE+W+S+N.I. CLOSE COMPANIES

Transfers by close companiesE+W+S+N.I.