CG36547 - 2006 IHT changes: IHT treatment from 22 March 2006: CGT holdover relief from 6 April 2006

This paragraph is only a summary and in considering whether gifts hold-over relief (CG66880P for gifts of business assets and CG67030P for gifts subject to Inheritance Tax) is available the relevant guidance and/or the legislation should be consulted.  Transfers to non-resident trusts or individuals broadly cannot qualify (TCGA92/S166), although there are exceptions relating to non-residents and interests in UK land (see the last section of CG66884).

Relief is available for transfers to a settlement

  • where the asset is a business asset, or shares in an unlisted trading company or parent of a trading group (TCGA92/S165), extended to agricultural land by paragraphs 1 and 3 of Schedule 7,
  • where the transfer is a chargeable transfer for IHT and not a PET (TCGA92/S260 (2)(a),
  • in certain rare cases of IHT exemptions  (TCGA92/S260 (2)(b)(c)(e)(f)).  These are not further considered here but are discussed in CG67033.

Note that where both are in point, relief under TCGA92/S260 takes priority over TCGA92/S165.

However transfers to settlements where any settlor or his spouse or civil partner has an interest cannot qualify (TCGA92/S169B) unless it is a trust for a disabled person or a heritage maintenance fund.  See TCGA92/S169D and CG67032.  Under FA2006 the definition of settlor interest was extended from 6 April 2006 to cases where a minor child of the settlor (including any step-child, but excluding any child married or in a civil partnership) can or does benefit.  Only existing minor children as opposed to possible minor children are taken into account.

A Potentially Exempt Transfer which becomes a chargeable transfer because the donor has died within seven years of the gift does not qualify.

It is available in one situation on the death of a person with an interest in possession:

  • Where section 74 (CG36510) applies, provided that it is a chargeable transfer for IHT.

Relief is available on transfers out of a trust, whether to an individual or to the trustees of another settlement:

  • where the asset is a business asset or shares in an unlisted trading company or parent of a trading group (TCGA92/S165), extended to agricultural land by paragraphs 1 and 3 of Schedule 7,
  • where the transfer is a chargeable transfer for IHT  (TCGA92/S260 (2)(a),
  • when a person becomes absolutely entitled as against the trustees of an accumulation and maintenance settlement (but note the restrictions in, CG36544) including the case where the principal beneficiary dies (TCGA92/S260 (2)(d),
  • where IHTA84/S71B(2),CG36544, provides that there is no chargeable transfer, (basically absolute entitlement of or death of bereaved minor) (TCGA92/S260 (2)(da)),
  • where IHTA84/S71E(2), CG36544, provides that there is no chargeable transfer (absolute entitlement or death of beneficiary of 18-25 trust at 18 or under) (TCGA92/S260 (2)(db)), and
  • in certain rare cases of IHT exemptions  (TCGA92/S260 (2)(b)(c)(e)(f)), which are not further considered here but are discussed in CG67033.