Ten year anniversary: relief for double charges
If property has
- been subject to a proportionate charge within the ten years preceding the ten yearly anniversary, and
- later becomes relevant property, and
- is now subject to the IHTA84/S64 charge at the ten-yearly anniversary (TYA),
apply IHTA84/S67 (6) relief against the TYA claim for the potential double charge.
These cases are extremely rare.
Without a relief the value of the proportionate charge
- would be cumulated at the TYA under IHTA84/S66 (5)(b), and
- it would be reflected in the taxable TYA fund.
Applying the relief
Apply the relief by reducing the trust’s cumulative total at the TYA by whichever is the lower value of
- The value on which tax was charged for the proportionate charge (or the proportion of it falling back in), or
- the value of the property (or proportion) as reflected in the TYA fund.
Note that the reduction is to the trust’s cumulative total, not to the taxable TYA fund itself. The relief can apply to more than one event.
- A non-interest in possession settlement dated 17 November 1981 had its first TYA on 17 November 1991. The taxable value was £893,000.
- A life interest in a quarter of the fund was appointed to Mrs H on 15 May 1995. Value of the transfer for proportionate charge was then £334,000.
- Mrs H dies on 28 October 1998 and the transferred assets fall back into relevant property.
- At the TYA on 17 November 2001 the value of the proportionate charge portion as existing in the whole fund can be identified as £522,000 out of a TYA total of £2,105,000.
- The settlement’s cumulative total will therefore be reduced under IHTA84/S67 (6) by £334,000 and not £522,000.
- If there existed other proportionate charges unaffected by IHTA84/S67 (6) which caused the nil-rate band to be exceeded, the reduction by £334,000 would make no difference to the calculation of rate – the TYA would still be taxed on a maximum 6%.
Interaction with IHTA82/S66 (2) relief
In the typical case where S67(6) applies, the property in question has once again become relevant property comprised in the settlement. As it has not been relevant property throughout the period of ten years preceding the TYA, then relief under S66(2) will be due. (IHTM42088)
This is not a duplicate relief
- S67(6) operates on the cumulative value only,
- S66(2) operates on the rate of tax upon relevant property