Discretionary trusts: trusts made before 27 March 1974
Ten year anniversary (TYA)
No anniversary charge can apply before 1 April 1983.
For any trust made before 27 March 1974, the calculation of the ten yearly charge does not include
- the settlor’s cumulative total of chargeable transfers (none because the settlement predates CTT and inheritance tax),
- the value of any other property in the settlement which is not relevant property,
- the value of property in a related settlement.
Where an addition is made to the settlement after 8 March 1982, the hypothetical cumulative total is the aggregate of the settlor’s chargeable transfers made in the seven (ten years before 18 March 1986) years before the addition.
Exit/proportionate charge before first TYA
The first TYA must have passed in these settlements, so this charge cannot arise now.
For information only in relevant cases:
The main difference from the rules for settlements set up since 26 March 1974 is in the calculation of the rate of the proportionate charge on an occasion arising before the first ten year anniversary of the settlements. The settlement is treated as a separate taxable entity.
There is no fraction by reference to the number of fortieths.
The rate of tax is:
- 30% of the tax that would be payable at lifetime rates if the amount being taxed
- were a chargeable transfer made by a person
- who had made other chargeable transfers
- equal to the amounts in respect of which any charges to tax have arisen under the settlement in the ten years ending with the date of the proportionate charge.
The rate of charge is reduced if property has not been relevant property throughout the ten years preceding the first anniversary.
Proportionate charge after the first TYA
The position is the same as for trusts set up after 27 March 1974. The charge is based on the rate charged at the last anniversary (with the exceptions as described above).
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)