Employee benefit trusts: conditions for relief: specified classes
The relief from Inheritance Tax at IHTA84/S86(1) applies where settled property is held on trusts which, either indefinitely or until the end of a period, do not permit any of the settled property to be applied for the benefit of anyone other than persons that belong to a group that is defined by their:
- employment with a particular trade or profession, or employment by, or official position with, a body that carries on a trade, profession or undertaking; or
- are married or in a relationship with or dependant on those people.
The precise wording of IHTA84/S86(1) is:
- a) persons of a class defined by reference to employment in a particular trade or profession, or employment by, or office with, a body carrying on a trade, profession or undertaking, or
- b) persons of a class defined by reference to marriage to, or civil partnership with, or relationship to, or dependence on, persons of a class defined as mentioned in paragraph (a) above,
Where the group is defined by employment the ‘all or most’ test (IHTM42915) must also be met.
IHTA84/S86(1) does not just apply to discretionary trusts. It can also apply where the interest in possession in the trust is less than five per cent (IHTM42946), although most employee benefit trusts are usually discretionary in some way.