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HMRC internal manual

Inheritance Tax Manual

Employee benefit trusts: sub-trusts: deeds

The provisions of IHTA84/S86(1) apply to ‘settled property held on trusts’ so you need to consider whether the terms of the trusts applying to the settled property in question satisfy the requirements. Where funds from an employee benefit trust (EBT) have been appointed to sub-trusts, it is the terms of those trusts that will apply to the settled property and you will need to consider whether those trusts meet the requirements.

If the EBT requires that any appointment of trust funds must be by deed, then nothing else short of that will be sufficient to create a sub-trust and prevent the trusts of the EBT applying to the funds concerned. Any other form of allocation of funds other than deed will not be enough (IHTM42978).

If the sub-trust itself meets the ‘all or most’ requirement (IHTM42915) then it is possible that the sub-trust meets the requirements of IHTA84/S86(1).

Where settled property is appointed onto sub-trusts, those trusts will be either

  • revocable, or
  • irrevocable.

Where the terms of the sub-trust are revocable it is possible for the sub-trust to be terminated and for the settled property to be held once again under the trusts of the original employee benefit trust. This is not possible where the trust is irrevocable.

The impact of whether sub-trusts are revocable or irrevocable is set out at IHTM42972