IHTM42811 - Special trusts: charitable, political and Heritage trusts

Transfers to trusts entirely for the benefit of exempt bodies under IHTA84/S23 to S27 are wholly exempt from the Inheritance Tax charge.   

  • The initial transfer by the settlor is exempt.   

  • There are no ten yearly or proportionate charges on the trust.   

  • There are no flat rate charges. 

Conditions 

  • None of the special/excluded trusts exemptions are available if the disposition by which the property became comprised in the exempt body is defeasible. 

  • If the disposition has not been defeated within 12 months of its becoming comprised in the exempt body and cannot be defeated after that time it is treated as indefeasible, even if it could have been defeated within those 12 months, IHTA84/S76 (5). 

  • No exemption is due if the property, or any part of it, may become applicable for purposes other than charity, political party or heritage body as described, IHTA84/S76 (6). 

  • If the amount on which tax would be charged apart from IHTA84/S76 in respect of any property exceeds its value immediately after it becomes comprised in the relevant body (less any consideration given by the trustees) IHTA84/S76(1) shall not apply and tax will be charged on the excess value. This is an anti-avoidance provision, which ensures that dispositions involving the trust, a relevant body, and a non-exempt person will not produce exemption on the whole amount, IHTA84/S76(3). 

Also see the following links for more information 

A tax charge may apply on property ceasing to be held in a heritage maintenance fund.