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HMRC internal manual

Inheritance Tax Manual

Special trusts: summary


Types of excluded discretionary trusts known commonly as special trusts (or favoured trusts) are

  • Temporary charitable trusts
  • Protective trusts
  • Trusts for disabled persons
  • Employee and newspaper trusts
  • Accumulation and maintenance trusts (A&M). Note: the IHT rules for these trusts changed in FA2006 (IHTM42807)

Other excluded trusts within IHTA84/S58 are

  • Charitable, political and Heritage trusts
  • Pension funds
  • Trade or professional compensation funds
  • Excluded property

Charges on the trusts

The common feature of these types of settlement is that they do not contain relevant property, and so are not subject to the ten year anniversary and proportionate charges under IHTA84/S64 and S65. However, the property may be subject to another charge on leaving the trust.

There is a normal inheritance tax exit charge (IHTA84/S65) when an existing discretionary trust is converted into one of these special trusts. (IHTM42110)

Two new types of trust were introduced in FA2006 which also have their own IHT charging regime