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HMRC internal manual

Inheritance Tax Manual

Employee benefit trusts: conditions for relief: splitting funds or 'hiving off'

IHTA84/S86(1) refers to settled property, held on trusts, which do not permit any of the settled property to be applied other than for qualifying beneficiaries (IHTM42911).

Where part of an existing discretionary settlement that does not meet the conditions of IHTA84/S86(1) is split or ‘hived off’ for the benefit of employees of a certain company, the word ‘any’ should be read strictly so that only the particular fund which is subject to the trusts for employees needs to be considered. The words ‘settled property’ can apply to only part of a fund and if different parts of a fund are subject to different trusts, they should be considered separately when looking at whether the conditions of IHTA84/S86(1) are met. The part of a fund that meets those conditions will not be relevant property.

The two parts of the fund subject to the different trusts are considered separately as to whether or not they are within IHTA/S86.