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HMRC internal manual

Inheritance Tax Manual

Settled property: the charging provisions for discretionary trusts

There are special rules for taxing settled property held on trust under which there is, for the time being, no individual entitled to an interest in possession. (IHTM16000) Such trusts are commonly referred to as discretionary trusts. (IHTM16000) The rules were introduced by the FA/82 which came into effect on 8 March 1982. Prior to this, a different charging regime applied for the period after 27 March 1974.

For the purposes of the charge to tax, property (IHTM04030) held on discretionary trusts is effectively divided into two categories, IHTA84/S58

  • relevant property, (IHTM16000) and
  • property held on various special trusts, for example, accumulation and maintenance funds.Generally, all property settled on discretionary trust is relevant property unless it is

  • held on one of the special trusts, or
  • excluded property. (IHTM04251)