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HMRC internal manual

Inheritance Tax Manual

Value left out of account: interest in possession as remuneration for services as trustee

The general rule is that a trustee (whether professional or not) is not entitled to remuneration for their services. However the settlement may provide for them to receive normal professional fees and/or an interest in possession (IIP) (IHTM16000) – commonly an annuity - in the settled property by way of remuneration. The right to charge fees has no particular consequence for the purposes of Inheritance Tax (IHT), but the right to an IIP constitutes a beneficial entitlement.

IHTA84/S90 provides that where an IIP comes to an end on a death (IHTM04082) the property is left out of account in determining the value of the deceased’s estate. Where such an interest comes to an end other than on death (IHTM04083) by excluding the charge under IHTA84/S52.

The relief applies only to the extent that the interest represents a reasonable amount of remuneration. You should interpret this as meaning a reasonable amount after making allowance for any fees which the trustee is entitled to receive under a professional charges clause.

Where relief was allowed under IHTA84/S90 on the termination of an IIP, and after an interval another trustee becomes entitled to an IIP in the settled property as remuneration, no claim should be raised under IHTA84/S52 (1) to the extent that the later interest represents no more than reasonable remuneration.

You should refer any case where your view of what constitutes a reasonable remuneration is disputed to Technical.

You may issue an assurance in appropriate circumstances to the effect that it is not proposed to claim IHT on the death or other event on which the annuity etc in question comes to an end.