IHTM45051 | Reduced rate for gifts to charity: other issues: charges arising following the deferral of tax for woodlands or conditional exemption

Where a charge arises following the deferral of tax due to a claim for woodlands relief (IHTM04121) or conditional exemption (IHTM04111) it would be possible for the reduced rate to apply if either there was ‘unused’ charity exemption when the original tax calculations were made, or as a result of changes in the rate of tax under IHTA84/Sch2. These ‘recapture’ charges generally arise where the beneficiary has sold the assets on which the charge was deferred. Consequential amendments in IHTA84/Sch1A prevent the reduced rate applying whenever a recapture charge arises, so such charges are always liable to tax at 40% and calculated as the top slice of the estate in the normal way. The specific provisions are

• FB12/Sch33/Para 4 inserts IHTA84/S33(2ZA) to disapply the reduced rate when calculating charges under IHTA84/S33 (conditional exemption),

• FB12/Sch33/Para 5 amends IHTA84/S78(3) to refer to IHTA84/S33(2ZA) so disapplying the reduced rate when calculating charges under IHTA84/S78 (chargeable occasion with relevant property trusts),

• FB12/Sch33/Para 6 renumbers IHTA84/S128 as subsection (1) and inserts IHTA84/S128(2) to disapply the reduced rate when calculating charges under IHTA84/S128 (woodlands), and

• FB12/Sch33/Para 8 inserts IHTA84/Sch4/Para 14(2A) to disapply the reduced rate when calculating charges under IHTA84/Sch4/Para 14 (maintenance funds).