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HMRC internal manual

Inheritance Tax Manual

Settled property: the charging provisions for an interest in possession trust during lifetime

Different provisions apply to charge IHT on an interest in possession (IHTM16000) (IIP) trust during the lifetime. These are

  • where the interest of a person beneficially entitled (IHTM04031) to an IIP in settled property ‘comes to an end’ (IHTM04084) during their lifetime, IHTA84/S52 (1),
  • where a person who is beneficially entitled to an IIP in settled property ‘disposes’ (IHTM04085) of their interest, IHTA84/S51 (1),
  • where there are dealings with the trust property which has the effect of reducing the value (IHTM04086) of the property in which any beneficiary has an IIP. In addition, we do not consider that a beneficial interest subsisting under a given legal system can in any circumstances be identified with one subsisting under a different legal system. Accordingly, where the beneficiaries under an English/Scottish settlement (

IHTM16000) effectively bring that settlement to an end (by whatever means) and substitute for it another settlement governed by a foreign legal system, you should regard them as having brought to an end the interests under the original English/ Scottish trust.

This applies even where the settled property remains the same and the beneficial interests under the new settlement are substantially similar to those that subsisted under the old one (Re Brockbank [1948] Ch 206).