IHTM04097 - Settled property: what is value of property held in discretionary trusts on which tax is charged?
For the ten year charge, tax is charged on the value of the relevant property (IHTM04095) in the settlement (IHTM16000) immediately before the anniversary, IHTA84/S64. The charge is on the value after business relief or agricultural relief, if appropriate, of the relevant property comprised in the settlement. The official view is that the relevant property does not include undistributed income that has not been accumulated.
The measure of the proportionate charge (IHTM04098) is the amount by which the value of the relevant property in the trust is diminished as a result of the event giving rise to the charge - that is the loss to the trust. If the tax payable is paid out of any relevant property remaining in the settlement the loss will be grossed up so that the amount chargeable includes the tax.