IHTM04096 - Settled property: charges on property held in discretionary trusts

There are two types of charges on property held in discretionary trusts - called relevant property (IHTM04095).

There is a charge every ten years (the ten-yearly charge), IHTA84/S64. The first is on the tenth anniversary of the date that property first became comprised in the trust.

The other charge is the proportionate charge, IHTA84/S65 which applies

• when the property ceases to be relevant property, IHTA84/S65 (1)(a) or
• when the trustees make a disposition (IHTM04023) which reduces the value of the relevant property, IHTA84/S65 (1)(b).

The main examples of property ceasing to be relevant property are when

• the settlement (IHTM16041) comes to an end
• some of the property is distributed to beneficiaries
• an individual becomes beneficially entitled to an interest in possession (IHTM16060) in the settled property
• the property is appointed on special trusts (IHTM42801) and
• when the property becomes excluded property, (IHTM04251) although no charge arises on property becoming excluded property under IHTA84/S48 (3) or IHTA84/S65 (7).

There are various circumstances in which the charge under IHTA84/S65 does not apply

• when the event which would otherwise give rise to the charge occurs in the three months after either the settlement commences or a ten-year charge arises, IHTA84/S65 (4), and
• where the property ceasing to be relevant property becomes

• the property of a qualifying charity or other exempt body, IHTA84/S76
• held on certain specified trusts for employees, IHTA84/S75 and S75A, where the property concerned is shares or securities in the company, or
• held on trusts of an approved fund for the maintenance of heritage property, IHTA84/SCH4/PARA16 onwards.