When is the first ten year anniversary date of a pre-2006 IIP trust which has converted to a discretionary trust?

Trusts Discussion
1

I am trying to work out the first ten year anniversary date of trust I am looking at.

It is a pre-2006 Lifetime Settlement created on 6 August 2003, by which the Settlor granted himself an IIP.

When the Settlor/Life Tenant died on 26 January 2015, the trust converted to a discretionary trust, which remains in place.

I think the first ten year anniversary will occur ten years after the date of death on 26 January 2025, but I can’t find any authority to support this.

I’d be grateful for any thoughts on the above.

2

My reading of s.80(1) IHTA 1984 is that provided the settlor has a qualifying interest in possession immediately upon creation of the settlement, the property is treated as not having become comprised in the settlement on that occasion; instead it is treated as becoming comprised in the settlement when the property or any part of it ceases to be held on trusts under which neither the settlor (nor their spouse or civil partner) has a qualifying interest in possession.

On the basis of the information provided, I agree that for the purposes of the IHT relevant property regime, the settlement commenced on 26 January 2015, but with the first periodic charge due on 25 January 2025.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Thank you Paul, that is really helpful.

4

I am not sure I agree. s61(2) says that 10 yr anniversaries of a trust treated as made under s80 are still based on the anniversaries of the first settlement.

5

Hi Nigel, thanks for drawing that to my attention – s.61(2) is not open to doubt.

In Anna’s case, the first periodic charge will be due 5 August 2023, based on the number of complete quarters from 26 January 2015 to that date.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

6

I would agree with nigelscase IHTM42221 states that “the starting date – the commencement - of the settlement is defined under IHTA84/S48A as the time when property first became comprised in it, and not as any later time when it first became held on relevant property trusts. This date, in turn, sets the date(s) for the ten-year anniversaries.”
So my understanding is that the anniversaries are based on 6 August 2003 so the next 10 yearly anniversary would be 5 August 2023 and as the property has not been relevant for the whole 10 years there will be relief available.
Kim Jarvis
Tax and Trust Consultant

2 Likes
7

Thank you everyone for your replies, it is much appreciated.

8

I agree that ss 60 and 61 IHTA 1984 are the relevant sections and hence the next ten year anniversary is 6 August 2023. The date of creation of the settlement is the relevant start date (not the date when trust property first qualifies as relevant property).

Having said this, in calculating a ten year charge the trust property is treated as if it were added on the date the iip terminated.

Malcolm Finney