IHTM42229 - The settlement: property moving from one settlement to another

When property is transferred from one settlement to another, usually as a result of a power of appointment or an assignment by a beneficiary, the property is treated as remaining in the first settlement but only for the purposes of the charges set out for relevant property trusts in Chapter III, Part III, IHTA84/S81 

This means that ten-year anniversary (TYA) charges (IHTM42081) arise on the transferred property on the TYA of the commencement of the first settlement. This rule therefore prevents transfers to another settlement from avoiding the TYA charge. 

The rule does not apply for the other purposes of the aggregate chargeable transfer (ACT) so that, e.g. the accountability and liability rules for the transferred property will be the responsibility of the recipient trustees.  

The transfer of property will rarely give rise to an exit charge. That is because either the property remains relevant property or there is a statutory exemption that applies, e.g. a transfer to a special trust such as a charitable trust or an employee benefit trust (see IHTA/S75, S75A & S76). However, if the recipient trust is, e.g. a disabled person’s trust then the property will then have become non-relevant property and a charge may arise. 

Impact on excluded property 

In cases where the property in the first trust was settled by someone who was not domiciled in the UK and the transferred property was excluded property then the property will only continue to be excluded property if an additional domicile test is satisfied. 

The additional test depends upon whether the transfer was before or on or after 22 July 2020. Guidance on this point is at IHTM42603