I am trying to ascertain if an exit charge arises on a distribution of capital in the first ten years of a discretionary will trust.
When the settlor died in 2019 he had some transferable nil rate band from his first wife such that the property placed in the trust equalled the total available nil rate bands which came to £475k hence there was no IHT payable.
I am aware on the first ten year charge the trust can only benefit from a single NRB but am unsure if the same applies to an exit charge within the first ten years.
If it does, I presume I would need to calculate a hypothetical tax rate when the trust was created to apply to the exit charge reduced by n/40 etc.
Any pointers would be greatly appreciated.
Andrew.
My understanding is that the availability of any transferable NRB is left out of account when calculating an exit charge within the first 10 years, and when calculating the liability for all periodic charges.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The TRNB is only available in relation to a death transfer: s8A IHTA. All the RPT chargeable event rates are based on a notional lifetime transfer by the settlor so only the settlor’s own NRB is taken into account in the rates in ss 66-69.
Just to double check: the TNRB can be used in the periodic charges and anniversary charge calculation if the deceased settles a trust in his Will using his NRB and the TNRB from his wife? The difference being that a lifetime settlement only allows the settlor to use their NRB but on death the TNRB can be used in a Will trust?