Statement of Practice 10 (1979)
Published 15 August 1979
© Crown copyright 1979
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/statement-of-practice-10-1979/statement-of-practice-10-1979
Many wills and settlements contain a clause empowering the trustees to permit a beneficiary to occupy a dwelling house which forms part of trust property on such terms as they think fit. The Commissioners for HM Revenue and Customs (HMRC) do not regard the existence of such a power as excluding any interest in possession of the property.
When there is no interest in possession in the property in question, the Commissioners for HMRC do not regard the exercise of the power as creating one if the effect is merely to allow non-exclusive occupation or to create a contractual tenancy for full consideration. The Commissioners for HMRC also take the view that no interest in possession arises on the creation of a lease for a term or a periodic tenancy for less than full consideration, though this will normally give rise to a charge for tax under Inheritance Tax Act (IHTA) 1984 section 65(1)(b). On the other hand, if the power is drawn in terms wide enough to cover the creation of an exclusive or joint residence, albeit revocable, for a definite or indefinite period, and is exercised with the intention of providing a particular beneficiary with a permanent home, HMRC will normally regard the exercise of the power as creating an interest in possession. And if the trustees in exercise of their powers grant a lease for life for less than full consideration, this will be regarded as creating an interest in possession in view of sections 43(3) and 50(6) IHTA 1984.
A similar view will be taken where the power is exercised over property in which another beneficiary had an interest in possession up to the time of the exercise.