Settlor’s PCLT - IHTA1984 s. 66(5)(a) - IHTM42255

For the purposes of calculating IHT charges upon exits from or 10-year anniversaries within a Relevant Property Trust, can forum members please confirm that Business Property Relief is not available so as to reduce the PCLT of the settlor.

Paul Storrie
Storrie and Company

The Settlor’s relevant cumulation within the prior 7 years before the commencement of the settlement (or date of addition where s67 applies) is net of any BPR given previously as BPR reduces the value transferred by any previous transfers of value: s3(1) with s104 IHTA. Once the value transferred by a chargeable RPT event is calculated under s64 or s65 it can itself attract BPR at the appropriate rate of 50% or 100% because s103(1) equates the event to a transfer by an individual.

If the RPT transfer of value itself attracts 100% relief the Settlor’s cumulation will not matter nor any prior distributions ahead of a 10 year chargeable event. Section 66-69 calculate the rate of tax if, and only if, tax is chargeable. Tax cannot be charged on a nil value (do not tempt the Chancellor by alerting him to this long-standing loophole).

A curiosity is the interaction between s 103 and s113A (Clawback). As s103(1)(b) treats trustees as a transferor for BPR generally and s113A(8) treats them as a transferee for clawback is what is the effect on trustees of clawback provisions that apply in the event of the death of a trustee “transferor” and of a prior death of a trustee “transferee”? Can a s45 trustee die? IHT trustees are not made a single and continuing body of persons as in s69 TCGA.

I trust judicial intervention would set a limit to this deeming nonsense under the recognised juridical doctrine of “Outcome not Convenient”. Though perhaps I am seeing things that are not there, mesmerised by reading too much legislation. IHTM42240 is no help (and refers to the wrong section number!). IHTM16050 refers to the correct section and suggests that a settlement must always be regarded as having a trustee under s45 as presumably the trust property must always be vested in some person albeit deceased (or a company in liquidation or dissolved) since the law of equity and trusts will supply a replacement trustee eventually, although some time might elapse before a formal appointment. No light is shed on this by IHTM25361-25370 on Clawback itself, which do not even mention at all the possibility that an actual transferee or an actual transferor (all mortal human beings) might be the trustees of a settlement, let alone all die, or a corporation, let alone one that could be in liquidation or dissolved.

Jack Harper