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HMRC internal manual

Inheritance Tax Manual

The settlement: initial IIP of settlor or spouse

IHTA84/S80 applies

  • to trusts made after 26 March 1974,
  • where the settlor or their spouse had an interest in possession (IIP) in property, which
  • on their death or other termination of the IIP, forms a discretionary trust.

The effect is that the property now held on discretionary trusts is treated as a separate trust made by the person (whichever spouse) who was last entitled to an IIP in it.

The separate trust is treated as made at the time the IIP interest came to an end, but

  • the trust has the same ten year anniversary as the original trust. IHTA84/S61 (2)

If the IIP ceases on death, any trusts created under the will of the person who had the last IIP will be related trusts. (IHTM42230)