IHTM11165 | Gifts to charities and registered clubs: Settled property: Transitional protection for existing interests in possession

Following the FA 2026 changes to IHTA84/S23 (omitting reference to ‘held on trust for charitable purposes only’ or ‘held on trust for purposes of registered clubs only’), transitional easement provisions were introduced in FA 2026 of how charity exemption may apply in certain circumstances on the cessation of a qualifying interest in possession.

The transitional provisions FA2026/S79 preserves exemption on cessation of the existing interest in possession (IHTA84/S49) where an arising charitable trust distributes to a charity or registered club.

This change has effect where the original transfer of value is made during a person’s lifetime on or after 26 November 2025, or where the original transfer of value is made on a person’s death where the death is on or after 6 April 2026.

The transitional provisions apply where:

• the original transfer of value occurs on the cessation of a person’s interest in possession (IHTM16062) which existed before 26 November 2025, and

• on cessation the property becomes held on trust only for charitable purposes, or only for registered clubs, (but is not given to charities or registered clubs) and

• within 2 years of the original transfer of value, the trust gives the property to charities or registered clubs.

The transitional provisions provide that the gift to the charity or registered club is treated as being made on the date of the original transfer of value to preserve charity exemption under IHTA84/S23 and the subsequent gift is disregarded for IHT purposes.