Skip to content
Solved

IHTM04096 | Settled property: charges on property held in relevant property trusts

From HM Revenue & Customs · Inheritance Tax Manual

There are two types of charges on property held in relevant property trusts (IHTM04095).

There is a charge every ten years (the ten-yearly charge), IHTA84/S64. The first is on the tenth anniversary of the date that property first became comprised in the trust.

The other charge is the proportionate charge (sometimes referred to as an exit charge), IHTA84/S65 which applies

  • when the property ceases to be relevant property, IHTA84/S65 (1)(a) or

  • when the trustees make a disposition (IHTM04023) which reduces the value of the relevant property, IHTA84/S65(1)(b).

The main examples of property ceasing to be relevant property are when

  • the settlement (IHTM16041) comes to an end

  • some of the property is distributed to beneficiaries

  • an individual becomes beneficially entitled to a qualifying interest in possession (IHTM16060) in the settled property

  • the property is appointed on special trusts (IHTM42801) and

  • in some cases, see example below, when the property becomes excluded property (IHTM04251) such as foreign propertycomprised in a settlement when the settlor ceases to be long-term UK resident (IHTM47000)

There are various circumstances in which the charge under IHTA84/S65 does not apply

  • Subject to exceptions on or after 26 November 2025 (see example below), when relevant property becomes excluded property under IHTA84/S48ZA because it becomes non-UK situs or is invested in favoured UK property, such as Authorised Unit Trusts (IHTA84/S65(7)-(8A).

  • where there is a payment of costs or expenses so far as they are fairly attributable to the relevant property (IHTA84/S65(5)(a)).

  • where there is a payment that is treated as income of any person for the purposes of income tax, IHTA84/S65(5)(b). For the purposes of this provision the effects of designation of a payment under the temporary repatriation facility are ignored (see paragraph 13B(1) Schedule 10 to FA 2025).

  • when the event which would otherwise give rise to the charge occurs in the three months after either the settlement commences or a ten-year charge arises, IHTA84/S65 (4), and

  • where the property ceasing to be relevant property becomes

  • the property of a qualifying charity or other exempt body, IHTA84/S76

  • held on certain specified trusts for employees, IHTA84/S75 and S75A, where the property concerned is shares or securities in the company, or

  • held on trusts of an approved fund for the maintenance of heritage property, IHTA84/SCH4/PARA16 onwards.

Example

Shona, a long-term UK resident, made a discretionary settlement in 2003 while domiciled in the UK. Shona ceases to be long-term UK resident on 6 April 2032 and the foreign property comprised in her settlement becomes excluded property at that time. There is a proportionate charge to reflect the period since the last ten-year anniversary (in 2023) and the property becoming excluded property on 6 April 2032.

If the settlement also held UK situs property at the time she ceased to be long-term UK resident, then no charge would have arisen (because that property remained relevant property) but the UK situs property will be subject to an anniversary charge in 2033.

However, if the trustees re-invest that property in foreign property before the anniversary then the saving under IHTA84/S65(7), which would have applied before 26 November 2025 does not apply and an exit charge arises (IHTA84/S65(8B)–(8C)).