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HMRC internal manual

Inheritance Tax Manual

Definition and extent of liability (settled property): trustees

Under IHTA84/S45, where there would otherwise be no trustees, ‘trustee’ means any person in whom the settled property (IHTM16050) or its management is for the time being vested.

Extent of liability

Under IHTA84/S204 (2) the liability of a trustee as trustee for tax attributable to trust property is limited to

  • such property as they have actually received or disposed of, including settled land vested in the tenant for life before the event giving rise to the charge (IHTA84/S204 (2)(a))
  • such property as they have become liable to account for to the beneficiaries (IHTA84/S204 (2)(a))
  • other property available in their hands as trustees for payment of tax or which might have been so available but for their own neglect or default (IHTA84/S204 (2)(b)).

Pension schemes

Where any tax is attributable to the value of a pension (IHTM17001) or annuity in or under such a fund as is specified in IHTA84/S151 (1) and which satisfies the conditions in IHTA84/S151 (2)(a) and (b) the trustees of the fund are excepted from liability by IHTA84/S210.  (Compare this with the position when the tax is on a chargeable transfer on death (IHTM30025)).

Disputed cases

Any case or letter which disputes or questions the liability of trustees to pay tax on settled property when a charge arises under Part III IHTA should be referred to Litigation Team.  This instruction includes any liability to pay tax in respect of an event which is treated as a potentially exempt transfer (IHTM04057) by virtue of s.96 F(No 2)A 1987. 

No communication should be sent to the taxpayers or their agents until the case (or letter) has been seen by Litigation Team.