Section 516: Transfer of property between settlements
1542.This section addresses occasions when heritage maintenance property leaves the HMS and becomes comprised in another settlement either:
without a charge to inheritance tax arising on the transfer; or
when the property does not cease to be heritage property on the transfer.
It is based on section 694(6) and (7) of ICTA.
1543.The “default rule” is that inheritance tax is charged when property leaves an HMS (paragraph 8 of Schedule 4 to IHTA).
1544.But no such charge arises if, within 30 days of the property leaving the HMS, it becomes comprised in another HMS. This is because the exemption for transfers into an HMS overrules the charge when the property leaves an HMS (paragraph 9(1) and (2) of Schedule 4 to IHTA). The only exception to this is when the value of the property leaving the first HMS is greater than its value on entering the second. In that case, inheritance tax is charged on the excess (paragraph 9(4) of Schedule 4 to IHTA). But that charge is ignored in considering the effect of this section (see the words in brackets in subsection (4)(a)).
1545.In some circumstances, a charge to income tax under section 512 could still arise, there being, for example, no 30-day permitted period in Case B set out in section 512 to match the “permitted period” in the inheritance tax provision.
1546.Subsection (2) ensures that no charge to income tax arises at the time of the transfer of the property if the transfer is also exempt for inheritance tax purposes, or if the property transferred remains heritage property throughout. Instead, the amount chargeable to income tax is deferred and added to any income taxable on the trustees of the later HMS if an occasion of charge occurs.
1547.Accordingly, subsection (3) determines the period over which the income to be charged is measured, applying the following modifications to the provisions in section 513:
the date of the last occasion of charge of the earlier HMS (see section 513(2)(a)) is attributed to the later HMS; and
the date on which the earlier HMS took effect (see section 513(2)(b)) is likewise attributed to the later one.
1548.The result is that any income of any earlier HMS (however many tax-free transfers have occurred) will be charged on the chargeable settlement to the extent that it has not been subject to this charge already.
