Inheritance Tax Act 1984

• (2) Where any question arises as to which of two or more specific gifts are outside the limit up to which a transfer is exempt or as to the extent to which a specific gift is outside that limit—

• (a) the excess shall be attributed to gifts not bearing their own tax before being attributed to gifts bearing their own tax, and

• (b) subject to paragraph (a) above, the excess shall be attributed to gifts in proportion to their values.

• (3) Where the only gifts with respect to which the transfer is or might be chargeable are specific gifts which do not bear their own tax, the amount referred to in subsection (1) above is the aggregate of—

• (a) the sum of the value of those gifts; and

• (b) the amount of tax which would be chargeable if the value transferred equalled that aggregate.

• (4) Where the specific gifts not bearing their own tax are not the only gifts with respect to which the transfer is or might be chargeable, the amount referred to in subsection (1) above is such amount as, after deduction of tax at the assumed rate specified in subsection (5) below, would be equal to the sum of the value of those gifts.

• (5) For the purposes of subsection (4) above—

• (a) the assumed rate is the rate found by dividing the assumed amount of tax by that part of the value transferred with respect to which the transfer would be chargeable on the hypothesis that—

• (i) the amount corresponding to the value of specific gifts not bearing their own tax is equal to the aggregate referred to in subsection (3) above, and

• (ii) the parts of the value transferred attributable to specific gifts and to gifts of residue or shares in residue are determined accordingly; and

• (b) the assumed amount of tax is the amount that would be charged on the value transferred on the hypothesis mentioned in paragraph (a) above.

• (6) For the purposes of this section, any liability of the transferor which is not to be taken into account under section 5(5) above or by virtue of section 103 of the Finance Act 1986 shall be treated as a specific gift and to the extent that any liability of the transferor is abated under the said section 103, that liability shall be treated as a specific gift.

Attribution of value to residuary gifts

39

Such part only of the value transferred shall be attributed to gifts of residue or shares in residue as is not attributed under section 38 above to specific gifts.

Gifts made separately out of different funds

40

Where gifts taking effect on a transfer of value take effect separately out of different funds the preceding provisions of this Chapter shall be applied separately to the gifts taking effect out of each of those funds, with the necessary adjustments of the values and amounts referred to in those provisions.

Burden of tax

41

Notwithstanding the terms of any disposition—

• (a) none of the tax on the value transferred shall fall on any specific gift if or to the extent that the transfer is exempt with respect to the gift, and

• (b) none of the tax attributable to the value of the property comprised in residue shall fall on any gift of a share of residue if or to the extent that the transfer is exempt with respect to the gift.

Supplementary

42

• (1) In this Chapter—

• “gift”, in relation to any transfer of value, means the benefit of any disposition or rule of law by which, on the making of the transfer, any property becomes (or would but for any abatement become) the property of any person or applicable for any purpose;

• “given” shall be construed accordingly;

• “specific gift” means any gift other than a gift of residue or of a share in residue.

• (2) For the purposes of this Chapter a gift bears its own tax if the tax attributable to it falls on the person who becomes entitled to the property given or (as the case may be) is payable out of property applicable for the purposes for which the property given becomes applicable.

• (3) Where—

• (a) the whole or part of the value transferred by a transfer of value is attributable to property which is the subject of two or more gifts, and

• (b) the aggregate of the values of the property given by each of those gifts is less than the value transferred or, as the case may be, that part of it,

then for the purposes of this Chapter (and notwithstanding the definition of a gift in subsection (1) above) the value of each gift shall be taken to be the relevant proportion of the value transferred or, as the case may be, that part of it; and the relevant proportion in relation to any gift is the proportion which the value of the property given by it bears to the said aggregate.

• (4) Where on the death of a person legal rights under the law of Scotland are claimed by a person entitled to claim them, they shall be treated for the purposes of this Chapter as a specific gift which bears its own tax; and in determining the value of such legal rights, any tax payable on the estate of the deceased shall be left out of account.

PART III — SETTLED PROPERTY

CHAPTER I — PRELIMINARY

Settlement and related expressions

43

• (1) The following provisions of this section apply for determining what is to be taken for the purposes of this Act to be a settlement, and what property is, accordingly, referred to as property comprised in a settlement or as settled property.

• (2) “Settlement” means any disposition or dispositions of property, whether effected by instrument, by parol or by operation of law, or partly in one way and partly in another, whereby the property is for the time being—

• (a) held in trust for persons in succession or for any person subject to a contingency, or

• (b) held by trustees on trust to accumulate the whole or part of any income of the property or with power to make payments out of that income at the discretion of the trustees or some other person, with or without power to accumulate surplus income, or

• (c) charged or burdened (otherwise than for full consideration in money or money’s worth paid for his own use or benefit to the person making the disposition) with the payment of any annuity or other periodical payment payable for a life or any other limited or terminable period,

or would be so held or charged or burdened if the disposition or dispositions were regulated by the law of any part of the United Kingdom; or whereby, under the law of any other country, the administration of the property is for the time being governed by provisions equivalent in effect to those which would apply if the property were so held, charged or burdened.

• (3) A lease of property which is for life or lives, or for a period ascertainable only by reference to a death, or which is terminable on, or at a date ascertainable only by reference to, a death, shall be treated as a settlement and the property as settled property, unless the lease was granted for full consideration in money or money’s worth; and where a lease not granted as a lease at a rack rent is at any time to become a lease at an increased rent it shall be treated as terminable at that time.

• (4) In relation to Scotland “settlement” also includes—

• (a) an entail,

• (b) any deed by virtue of which an annuity is charged on, or on the rents of, any property (the property being treated as the property comprised in the settlement), and

• (c) any deed creating or reserving a proper liferent of any property whether heritable or moveable (the property from time to time subject to the proper liferent being treated as the property comprised in the settlement);

and for the purposes of this subsection “deed” includes any disposition, arrangement, contract, resolution, instrument or writing.

• (5) In the application of this Act to Northern Ireland this section shall have effect as if references to property held in trust for persons included references to property standing limited to persons and as if the lease referred to in subsection (3) did not include a lease in perpetuity within the meaning of section 1 of the Renewable Leasehold Conversion Act 1849 or a lease to which section 37 of that Act applies.

Settlor

44

• (1) In this Act “settlor”, in relation to a settlement, includes any person by whom the settlement was made directly or indirectly, and in particular (but without prejudice to the generality of the preceding words) includes any person who has provided funds directly or indirectly for the purpose of or in connection with the settlement or has made with any other person a reciprocal arrangement for that other person to make the settlement.

• (2) Where more than one person is a settlor in relation to a settlement and the circumstances so require, this Part of this Act (except section 48(4) to (6)) shall have effect in relation to it as if the settled property were comprised in separate settlements.

Trustee

45

In this Act “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this section, means any person in whom the settled property or its management is for the time being vested.

Interest in possession: Scotland

46

In the application of this Act to Scotland, any reference to an interest in possession in settled property is a reference to an interest of any kind under a settlement by virtue of which the person in right of that interest is entitled to the enjoyment of the property or would be so entitled if the property were capable of enjoyment, including an interest of an assignee under an assignation of an interest of any kind (other than a reversionary interest) in property subject to a proper liferent; and the person in right of such an interest at any time shall be deemed to be entitled to a corresponding interest in the whole or any part of the property comprised in the settlement.

Reversionary interest

47

In this Act “reversionary interest” means a future interest under a settlement, whether it is vested or contingent (including an interest expectant on the termination of an interest in possession which, by virtue of section 50 below, is treated as subsisting in part of any property) and in relation to Scotland includes an interest in the fee of property subject to a proper liferent.

Excluded property

48

• (1) A reversionary interest is excluded property unless—

• (a) it has at any time been acquired (whether by the person entitled to it or by a person previously entitled to it) for a consideration in money or money’s worth, or

• (b) it is one to which either the settlor or his spouse or civil partner is or has been beneficially entitled, or

• (c) it is the interest expectant on the determination of a lease treated as a settlement by virtue of section 43(3) above or,

• (d) in a case where paragraphs (a), (b) and (d) of section 74A(1) are satisfied—

• (i) it is a reversionary interest, in the relevant settled property, to which the individual is beneficially entitled, and

• (ii) the individual has or is able to acquire (directly or indirectly) another interest in that relevant settled property.

Terms used in paragraph (d) have the same meaning as in section 74A.

• (2) In relation to a reversionary interest under a settlement made before 16th April 1976, subsection (1) above shall have effect with the omission of paragraph (b); and, if the person entitled to a reversionary interest under a settlement made on or after 16th April 1976 acquired the interest before 10th March 1981, that subsection shall have effect with the omission of the words “or has been” in paragraph (b).

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) Where securities issued by the Treasury subject to a condition of the kind mentioned in subsection (2) of section 6 above are comprised in a settlement, that subsection shall not apply to them; but the securities are excluded property if—

• (a) a person of a description specified in the condition in question is entitled to a qualifying interest in possession in them, or

• (b) no qualifying interest in possession subsists in them but it is shown that all known persons for whose benefit the settled property or income from it has been or might be applied, or who are or might become beneficially entitled to an interest in possession in it, are persons of a description specified in the condition in question.

This subsection is subject to Schedule A1.

• (5) Where—

• (a) property ceased to be comprised in one settlement before 10th December 1981 and after 19th April 1978 and, by the same disposition, became comprised in another settlement, or

• (b) property ceased to be comprised in one settlement after 9th December 1981 and became comprised in another without any person having in the meantime become beneficially entitled to the property (and not merely to an interest in possession in the property),

subsection (4)(b) above shall, in its application to the second settlement, be construed as requiring the matters there stated to be shown both in relation to the property comprised in that settlement and in relation to the property that was comprised in the first settlement.

• (6) Subsection (5) above shall not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the second settlement before 10th December 1981.

• (7) In this section “qualifying interest in possession” has the same meaning as in Chapter III of this Part of this Act.

CHAPTER II — INTERESTS IN POSSESSION, REVERSIONARY INTERESTS AND SETTLEMENT POWERS

Treatment of interests in possession

49

• (1) A person beneficially entitled to an interest in possession in settled property shall be treated for the purposes of this Act as beneficially entitled to the property in which the interest subsists.

• (1A) Where the interest in possession mentioned in subsection (1) above is one to which the person becomes beneficially entitled on or after 22nd March 2006, subsection (1) above applies in relation to that interest only if, and for so long as, it is—

• (a) an immediate post-death interest,

• (b) a disabled person's interest, or

• (c) a transitional serial interest,

or falls within section 5(1B) above.

• (1B) Where the interest in possession mentioned in subsection (1) above is one to which the person became beneficially entitled before 22nd March, subsection (1) above does not apply in relation to that interest at any time when section 71A below applies to the property in which the interest subsists.

• (2) Where a person becomes entitled to an interest in possession in settled property as a result of a disposition for a consideration in money or money’s worth, any question whether and to what extent the giving of the consideration is a transfer of value or chargeable transfer shall be determined without regard to subsection (1) above.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interests in part, etc.

50

• (1) Where the person referred to in section 49(1) above is entitled to part only of the income (if any) of the property, the interest shall be taken to subsist in such part only of the property as bears to the whole the same proportion as the part of the income to which he is entitled bears to the whole of the income.

• (2) Where the part of the income of any property to which a person is entitled is a specified amount (or the whole less a specified amount) in any period, his interest in the property shall be taken, subject to subsection (3) below, to subsist in such part (or in the whole less such part) of the property as produces that amount in that period.

• (3) The Treasury may from time to time by order prescribe a higher and a lower rate for the purposes of this section; and where tax is chargeable in accordance with subsection (2) above by reference to the value of the part of a property which produces a specified amount or by reference to the value of the remainder (but not where chargeable transfers are made simultaneously and tax is chargeable by reference to the value of that part as well as by reference to the value of the remainder) the value of the part producing that specified amount—

• (a) shall, if tax is chargeable by reference to the value of that part, be taken to be not less than it would be if the property produced income at the higher rate so prescribed, and

• (b) shall, if tax is chargeable by reference to the value of the remainder, be taken to be not more than it would be if the property produced income at the lower rate so prescribed;

but the value to be taken by virtue of paragraph (a) above as the value of part of a property shall not exceed the value of the whole of the property.

• (4) The power to make orders under subsection (3) above shall be exercisable by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons.

• (5) Where the person referred to in section 49(1) above is not entitled to any income of the property but is entitled, jointly or in common with one or more other persons, to the use and enjoyment of the property, his interest shall be taken to subsist in such part of the property as corresponds to the proportion which the annual value of his interest bears to the aggregate of the annual values of his interest and that or those of the other or others.

• (6) Where, under section 43(3) above, a lease of property is to be treated as a settlement, the lessee’s interest in the property shall be taken to subsist in the whole of the property less such part of it as corresponds to the proportion which the value of the lessor’s interest (as determined under Part VI of this Act) bears to the value of the property.

Disposal of interest in possession

51

• (1) Where a person beneficially entitled to an interest in possession in settled property disposes of his interest the disposal—

• (a) is not a transfer of value, but

• (b) shall be treated for the purposes of this Chapter as the coming to an end of his interest;

and tax shall be charged accordingly under section 52 below.

• (1A) Where the interest disposed of is one to which the person became beneficially entitled on or after 22nd March 2006, subsection (1) above applies in relation to the disposal only if the interest is—

• (a) an immediate post-death interest,

• (b) a disabled person's interest within section 89B(1)(c) or (d) below, or

• (c) a transitional serial interest,

or falls within section 5(1B) above.

• (1B) Where the interest disposed of is one to which the person became beneficially entitled before 22nd March 2006, subsection (1) above does not apply in relation to the disposal if, immediately before the disposal, section 71A or 71D below applies to the property in which the interest subsists.

• (2) Where a disposition satisfying the conditions of section 11 above is a disposal of an interest in possession in settled property, the interest shall not by virtue of subsection (1) above be treated as coming to an end.

• (3) References in this section to any property or to an interest in any property include references to part of any property or interest.

Charge on termination of interest in possession

52

• (1) Where at any time during the life of a person beneficially entitled to an interest in possession in settled property his interest comes to an end, tax shall be charged, subject to section 53 below, as if at that time he had made a transfer of value and the value transferred had been equal to the value of the property in which his interest subsisted.

• (2) If the interest comes to an end by being disposed of by the person beneficially entitled to it and the disposal is for a consideration in money or money’s worth, tax shall be chargeable under this section as if the value of the property in which the interest subsisted were reduced by the amount of the consideration; but in determining that amount the value of a reversionary interest in the property or of any interest in other property comprised in the same settlement shall be left out of account.

• (2A) Where the interest mentioned in subsection (1) or (2) above is one to which the person became beneficially entitled on or after 22nd March 2006, that subsection applies in relation to the coming to an end of the interest only if the interest is—

• (a) an immediate post-death interest,

• (b) a disabled person's interest, or

• (c) a transitional serial interest,

or falls within section 5(1B) above.

• (3) Where a transaction is made between the trustees of the settlement and a person who is, or is connected with,—

• (a) the person beneficially entitled to an interest in the property, or

• (b) a person beneficially entitled to any other interest in that property or to any interest in any other property comprised in the settlement, or

• (c) a person for whose benefit any of the settled property may be applied,

and, as a result of the transaction, the value of the first-mentioned property is less than it would be but for the transaction, a corresponding part of the interest shall be deemed for the purposes of this section to come to an end, unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value.

• (3A) Where the interest mentioned in paragraph (a) of subsection (3) above is one to which the person mentioned in that paragraph became beneficially entitled on or after 22nd March 2006, that subsection applies in relation to the transaction only if the interest is—

• (a) an immediate post-death interest,

• (b) a disabled person's interest, or

• (c) a transitional serial interest,

or falls within section 5(1B) above.

• (4) References in this section or section 53 below to any property or to an interest in any property include references to part of any property or interest; and—

• (a) the tax chargeable under this section on the coming to an end of part of an interest shall be charged as if the value of the property (or part) in which the interest subsisted were a corresponding part of the whole; and

• (b) if the value of the property (or part) to which or to an interest in which a person becomes entitled as mentioned in subsection (2) of section 53 below is less than the value on which tax would be chargeable apart from that subsection, tax shall be chargeable on a value equal to the difference.

Exceptions from charge under section 52

53

• (1) Tax shall not be chargeable under section 52 above if the settled property is excluded property.

• (1A) Tax shall not be chargeable under section 52 above if—

• (a) the person whose interest comes to an end became beneficially entitled to the interest before 22nd March 2006,

• (b) the interest comes to an end on or after that day, and

• (c) immediately before the interest comes to an end, section 71A or 71D below applies to the property in which the interest subsists.

• (2) Tax shall not be chargeable under section 52 above (except in the case mentioned in subsection (4)(b) of that section) if the person whose interest in the property comes to an end becomes on the same occasion beneficially entitled to the property or to another interest in possession in the property.

• (2A) Subsection (2) above applies by virtue of the person becoming beneficially entitled on or after 12 March 2008 to another interest in possession in the property only if that other interest is—

• (a) a disabled person's interest, or

• (b) a transitional serial interest;

and that is the case irrespective of whether the person's beneficial entitlement to the interest in possession in the property which comes to an end is one which began before, or on or after, 22 March 2006.

• (3) Tax shall not be chargeable under section 52 above if the interest comes to an end during the settlor’s life and on the same occasion the property in which the interest subsisted reverts to the settlor.

• (4) Tax shall not be chargeable under section 52 above if on the occasion when the interest comes to an end—

• (a) the settlor’s spouse or civil partner, or

• (b) where the settlor has died less than two years earlier, the settlor’s widow or widower or surviving civil partner,

becomes beneficially entitled to the settled property and is a long-term UK resident.

• (4A) Tax shall not be chargeable under section 52 above if—

• (a) the settled property became comprised in the settlement before 30 October 2024,

• (b) immediately before 30 October 2024, the settled property was excluded property by virtue of section 48(3) or (3A) (as it had effect at that time),

• (c) the person whose interest comes to an end became beneficially entitled to the interest before 30 October 2024, and

• (d) immediately before the person’s interest in possession in it comes to an end, the settled property—

• (i) was situated outside the United Kingdom and was not property to which paragraph 2 or 3 of Schedule A1 applied (overseas property with value attributable to UK residential property), or

• (ii) was a holding in an authorised unit trust or a share in an open-ended investment company.

• (5) Subsections (3) and (4) above shall not apply in any case where—

• (a) the settlor or the spouse or civil partner (or in a case within subsection (4)(b), the widow or widower or surviving civil partner) of the settlor had acquired a reversionary interest in the property for a consideration in money or money’s worth, or

• (b) their application depends upon a reversionary interest having been transferred into a settlement on or after 10th March 1981.

• (6) For the purposes of subsection (5) above a person shall be treated as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that interest or of other property.

• (7) Where the acquisition of the interest was before 12th April 1978, subsection (5)(a) above shall have effect, so far as it relates to subsection (3) above, with the omission of the reference to the spouse or civil partner of the settlor.

• (8) Subsection (6) above shall not apply where the person concerned became entitled to the interest before 12th April 1978.

Exceptions from charge on death

54

• (1) Where a person is entitled to an interest in possession in settled property which on his death, but during the settlor’s life, reverts to the settlor, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

• (2) Where on the death of a person entitled to an interest in possession in settled property—

• (a) the settlor’s spouse or civil partner, or

• (b) if the settlor has died less than two years earlier, the settlor’s widow or widower or surviving civil partner,

becomes beneficially entitled to the settled property and is a long-term UK resident, the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the deceased’s estate immediately before his death.

• (2A) Where a person becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property, subsections (1) and (2) above apply in relation to the interest only if it is—

• (a) a disabled person's interest, or

• (b) a transitional serial interest.

• (2B) Where—

• (a) a person (“B”) becomes beneficially entitled on or after 22nd March 2006 to an interest in possession in settled property,

• (b) B dies,

• (c) the interest in possession, throughout the period beginning with when B becomes beneficially entitled to it and ending with B's death, is an immediate post-death interest,

• (d) the settlor died before B's death but less than two years earlier, and

• (e) on B's death, the settlor's widow or widower, or surviving civil partner, becomes beneficially entitled to the settled property and is a long-term UK resident,

the value of the settled property shall be left out of account in determining for the purposes of this Act the value of B's estate immediately before his death.

• (2C) Where—

• (a) a person who is entitled to an interest in possession in settled property dies,

• (b) the settled property became comprised in the settlement before 30 October 2024,

• (c) immediately before 30 October 2024, the settled property was excluded property by virtue of section 48(3) or (3A) (as it had effect at that time),

• (d) the person became beneficially entitled to the interest before 30 October 2024, and

• (e) immediately before the person’s death, the settled property—

• (i) was situated outside the United Kingdom and was not property to which paragraph 2 or 3 of Schedule A1 applied (overseas property with value attributable to UK residential property), or

• (ii) was a holding in an authorised unit trust or a share in an open-ended investment company,

the value of the settled property shall be left out of account in determining for the purposes of this Act the value of the person’s estate immediately before their death.

• (2D) Where a person became beneficially entitled to an interest in possession in settled property on or after 22 March 2006, subsection (2C) applies in relation to the interest only if it is—

• (a) an immediate post-death interest,

• (b) a disabled person’s interest, or

• (c) a transitional serial interest,

or falls within section 5(1B) (certain interests acquired with no gratuitous benefit).

• (3) Subsections (5) and (6) of section 53 above shall apply in relation to subsections (1), (2) and (2B) above as they apply in relation to section 53(3) and (4) , but as if the reference in section 53(5)(a) above to section 53(4)(b) above were to subsection (2)(b) or (2B) above. .

• (4) For the purposes of this section, where it cannot be known which of two or more persons who have died survived the other or others they shall be assumed to have died at the same instant.

Reversionary interest acquired by beneficiary

55

• (1) Notwithstanding section 5(1) above, where a person entitled to an interest (whether in possession or not) in any settled property acquires a reversionary interest expenctant (whether immediately or not) on that interest, the reversionary interest is not part of his estate for the purposes of this Act.

• (2) Section 10(1) above shall not apply to a disposition by which a reversionary interest is acquired in the circumstances mentioned in subsection (1) above . . .

Exclusion of certain exemptions

56

• (1) Sections 18 and 23 to 27 above shall not apply in relation to property which is given in consideration of the transfer of a reversionary interest if, by virtue of section 55(1) above, that interest does not form part of the estate of the person acquiring it.

• (2) Where a person acquires a reversionary interest in any settled property for a consideration in money or money’s worth, section 18 above shall not apply in relation to the property when it becomes the property of that person on the termination of the interest on which the reversionary interest is expectant.

• (3) Sections 23 to 27 above shall not apply in relation to any property if—

• (a) the property is an interest in possession in settled property and the settlement does not come to an end in relation to that settled property on the making of the transfer of value, or

• (b) immediately before the time when it becomes the property of the exempt body it is comprised in a settlement and, at or before that time, an interest under the settlement is or has been acquired for a consideration in money or money’s worth by that or another exempt body.

• (4) In subsection (3)(b) above “exempt body” means a charity, political party or other body within sections 23 to 25 above or the trustees of a settlement in relation to which a direction under paragraph 1 of Schedule 4 to this Act has effect; and for the purposes of subsection (3)(b) there shall be disregarded any acquisition from a charity, political party or body within sections 23 to 25.

• (5) For the purposes of subsections (2) and (3) above, a person shall be treated as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that interest or of other property.

• (6) Nothing in this section shall apply to a transfer of value if or to the extent that it is a disposition whereby the use of money or other property is allowed by one person to another.

• (7) Subsection (2) above shall not apply where the acquisition of the reversionary interest was before 16th April 1976; and where the acquisition was on or after that date but before 12th April 1978 that subsection shall have effect—

• (a) with the substitution for the words “section 18 above” of the words “sections 18 and 23 to 25 above”, and

• (b) with the insertion after the word “person” in both places where it occurs of the words “or body”.

• (8) Subsection (3)(b) above shall not apply where the acquisition of the interest was before 12th April 1978; and subsection (5) above shall not apply where the person concerned became entitled to the interest before that date.

Application of certain exemptions

57

• (1) Subject to subsection (3) below, references to transfers of value in sections 19 and 22 above shall be construed as including references to events on the happening of which tax is chargeable under section 52 above, and references to the transferor and (in section 22(3) and (4)) to a disposition shall be construed accordingly.

• (2) For the purposes of its application, by virtue of subsection (1) above, to the termination of interests in possession in settled property, section 22 above shall have effect as if—

• (a) references to transfers of value made by gifts in consideration of marriage or civil partnership were references to the termination of such interests in consideration of marriage or civil partnership;

• (b) references to outright gifts were references to cases where the property ceases on the termination to be settled property; and

• (c) references to cases where the property is settled by the gift were references to cases where it remains settled property after the termination.

• (3) Subsection (1) above shall not apply to a transfer of value—

• (a) unless the transferor has in accordance with subsection (4) below given to the trustees of the settlement a notice informing them of the availability of an exemption, and

• (b) except to the extent specified in that notice.

• (4) A notice under subsection (3) above shall be in such form as may be prescribed by the Board and shall be given before the end of the period of six months beginning with the date of the transfer of value.

• (5) Section 27 above shall apply where the value transferred by a transfer of value is attributable to property which immediately after the transfer remains comprised in a settlement as it applies where property becomes comprised in a settlement by virtue of the transfer.

CHAPTER III — SETTLEMENTS WITHOUT INTERESTS IN POSSESSION , AND CERTAIN SETTLEMENTS IN WHICH INTERESTS IN POSSESSION SUBSIST

Interpretation

Relevant property

58

• (1) In this Chapter “relevant property” means settled property in which no qualifying interest in possession subsists, other than—

• (a) property held for charitable purposes only, whether for a limited time or otherwise;

• (b) property to which section 71, 71A, 71D, 73, 74 or 86 below applies (but see subsection (1A) below) ;

• (c) property held on trusts which comply with the requirements mentioned in paragraph 3(1) of Schedule 4 to this Act, and in respect of which a direction given under paragraph 1 of that Schedule has effect;

• (d) property which is held for the purposes of a registered pension scheme , a qualifying non-UK pension scheme or asection 615(3) scheme;

• (e) property comprised in a trade or professional compensation fund;

• (ea) property comprised in an asbestos compensation settlement, . . .

• (eb) property comprised in a decommissioning security settlement; and

• (f) excluded property.

• (1A) Settled property to which section 86 below applies is “relevant property” for the purposes of this Chapter if—

• (a) an interest in possession subsists in that property, and

• (b) that interest falls within subsection (1B) or (1C) below.

• (1B) An interest in possession falls within this subsection if—

• (a) an individual is beneficially entitled to the interest in possession,

• (b) the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, and

• (c) the interest in possession is—

• (i) not an immediate post-death interest,

• (ii) not a disabled person's interest, and

• (iii) not a transitional serial interest.

• (1C) An interest in possession falls within this subsection if—

• (a) a company is beneficially entitled to the interest in possession,

• (b) the business of the company consists wholly or mainly in the acquisition of interests in settled property,

• (c) the company has acquired the interest in possession for full consideration in money or money's worth from an individual who was beneficially entitled to it,

• (d) the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, and

• (e) immediately before the company acquired the interest in possession, the interest in possession was neither an immediate post-death interest nor a transitional serial interest.

• (2) The reference in subsection (1)(d) above to property which is . . . held for the purposes of a . . . scheme does not include a reference to a benefit which, having become payable under the . . . scheme, becomes comprised in a settlement.

• (2A) For the purposes of subsection (1)(d) above—

• (a) property applied to pay lump sum death benefits within section 168(1) of the Finance Act 2004 in respect of a member of a registered pension scheme is to be taken to be held for the purposes of the scheme from the time of the member's death until the payment is made, and

• (b) property applied to pay lump sum death benefits in respect of a member of a qualifying non-UK pension scheme or a section 615(3) scheme is to be taken to be so held if the benefits are paid within the period of two years beginning with the earlier of the day on which the member's death was first known to the trustees or other persons having the control of the fund and the day on which they could first reasonably be expected to have known of it.

• (3) In subsection (1)(e) above “trade or professional compensation fund” means a fund which is maintained or administered by a representative association of persons carrying on a trade or profession and the only or main objects of which are compensation for or relief of losses or hardship that, through the default or alleged default of persons carrying on the trade or profession or of their agents or servants, are incurred or likely to be incurred by others.

• (4) In subsection (1)(ea) above “asbestos compensation settlement” means a settlement—

• (a) the sole or main purpose of which is making compensation payments to or in respect of individuals who have, or had before their death, an asbestos-related condition, and

• (b) which is made before 24 March 2010 in pursuance of an arrangement within subsection (5) below.

• (5) An arrangement is within this subsection if it is—

• (a) a voluntary arrangement that has taken effect under Part 1 of the Insolvency Act 1986 or Part 2 of the Insolvency (Northern Ireland) Order 1989,

• (b) a compromise or arrangement that has taken effect under section 425 of the Companies Act 1985, Article 418 of the Companies (Northern Ireland) Order 1986 or Part 26 of the Companies Act 2006, or

• (c) an arrangement or compromise of a kind corresponding to any of those mentioned in paragraph (a) or (b) above that has taken effect under, or as a result of, the law of a country or territory outside the United Kingdom.

• (6) For the purposes of subsection (1)(eb) above a settlement is a “decommissioning security settlement” if the sole or main purpose of the settlement is to provide security for the performance of obligations under an abandonment programme.

• (7) In subsection (6)—

• “abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised);

• “security” has the same meaning as in section 38A of that Act.

Qualifying interest in possession

59

• (1) In this Chapter “qualifying interest in possession” means—

• (a) an interest in possession—

• (i) to which an individual is beneficially entitled, and

• (ii) which, if the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, is an immediate post-death interest, a disabled person's interest or a transitional serial interest, or

• (b) an interest in possession to which, where subsection (2) below applies, a company is beneficially entitled.

• (2) This subsection applies where—

• (a) the business of the company consists wholly or mainly in the acquisition of interests in settled property, and

• (b) the company has acquired the interest for full consideration in money or money’s worth from an individual who was beneficially entitled to it , and

• (c) if the individual became beneficially entitled to the interest in possession on or after 22nd March 2006, the interest is an immediate post-death interest, or a disabled person's interest within section 89B(1)(c) or (d) below or a transitional serial interest, immediately before the company acquires it.

• (3) Where the acquisition mentioned in paragraph (b) of subsection (2) above was before 14th March 1975—

• (a) the condition set out in paragraph (a) of that subsection shall be treated as satisfied if the business of the company was at the time of the acquisition such as is described in that paragraph, and

• (b) that condition need not be satisfied if the company —

• (i) is an insurance company (within the meaning of Part 2 of the Finance Act 2012), and

• (ii) has permission under Part 4A of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance.

• (4) In subsection (3)(b) above “contracts of long-term insurance” means contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

Commencement of settlement

60

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ten-year anniversary

61

• (1) In this Chapter “ten-year anniversary” in relation to a settlement means the tenth anniversary of the date on which the settlement commenced and subsequent anniversaries at ten-yearly intervals, but subject to subsections (2) to (4) below.

• (2) The ten-year anniversaries of a settlement treated as made under section 80 below shall be the dates that are (or would but for that section be) the ten-year anniversaries of the settlement first mentioned in that section.

• (3) No date falling before 1st April 1983 shall be a ten-year anniversary.

• (4) Where—

• (a) the first ten-year anniversary of a settlement would apart from this subsection fall during the year ending with 31st March 1984, and

• (b) during that year an event occurs in respect of the settlement which could not have occurred except as the result of some proceedings before a court, and

• (c) the event is one on which tax was chargeable under Chapter II of Part IV of the Finance Act 1982 (or, apart from Part II of Schedule 15 to that Act, would have been so chargeable),

the first ten-year anniversary shall be taken to be 1st April 1984 (but without affecting the dates of later anniversaries).

Related settlements

62

• (1) For the purposes of this Chapter two settlements are related if and only if—

• (a) the settlor is the same in each case, and

• (b) they commenced on the same day,

but subject to subsection (2) below.

• (2) Two settlements are not related for the purposes of this Chapter if all the property comprised in one or both of them was immediately after the settlement commenced held for charitable purposes only without limit of time (defined by a date or otherwise).

Minor interpretative provisions

63

In this Chapter, unless the context otherwise requires—

• “payment” includes a transfer of assets other than money;

• “quarter” means period of three months.

Principal charge to tax

Charge at ten-year anniversary

64

• (1) Where immediately before a ten-year anniversary all or any part of the property comprised in a settlement is relevant property, tax shall be charged at the rate applicable under sections 66 and 67 below on the value of the property or part at that time.

• (1A) For the purposes of subsection (1) above, property held by the trustees of a settlement immediately before a ten-year anniversary is to be regarded as relevant property comprised in the settlement at that time if—

• (a) it is income of the settlement,

• (b) the income arose before the start of the five years ending immediately before the ten-year anniversary,

• (c) the income arose (directly or indirectly) from property comprised in the settlement that, when the income arose, was relevant property, and

• (d) when the income arose, no person was beneficially entitled to an interest in possession in the property from which the income arose.

• (1B) Where the settlor of property comprised in a settlement meets the condition in subsection (1BZA), income of the settlement that arose (directly or indirectly) from the property is not to be regarded as relevant property comprised in the settlement as a result of subsection (1A) above so far as the income—

• (a) is situated outside the United Kingdom, or

• (b) is represented by a holding in an authorised unit trust or a share in an open-ended investment company.

• (1BZA) The condition is that the settlor—

• (a) is alive and is not a long-term UK resident immediately before the ten-year anniversary,

• (b) died on or after 6 April 2025 and was not a long-term UK resident immediately before their death, or

• (c) died before 6 April 2025 and was not domiciled in the United Kingdom when the property became comprised in the settlement.

• (1BA) If—

• (a) an amount is payable in respect of property (“the existing property”) comprised in a settlement, and

• (b) the amount represents an accumulation of income which (once accumulated) becomes comprised in the settlement,

subsection (1BZA)(c) has effect, in the case of the amount, as if any reference to the time it became comprised in the settlement were to the time the existing property became comprised in the settlement.

• (1C) Income of the settlement is not to be regarded as relevant property comprised in the settlement as a result of subsection (1A) above so far as the income—

• (a) is represented by securities issued by the Treasury subject to a condition of the kind mentioned in subsection (2) of section 6 above, and

• (b) it is shown that all known persons for whose benefit the settled property or income from it has been or might be applied, or who are or might become beneficially entitled to an interest in possession in it, are persons of a description specified in the condition in question.

• (2) For the purposes of subsection (1) above, a foreign-owned work of art which is situated in the United Kingdom for one or more of the purposes of public display, cleaning and restoration (and for no other purpose) is not to be regarded as relevant property.

Charge at other times

65

• (1) There shall be a charge to tax under this section—

• (a) where the property comprised in a settlement or any part of that property ceases to be relevant property (whether because it ceases to be comprised in the settlement or otherwise); and

• (b) in a case in which paragraph (a) above does not apply, where the trustees of the settlement make a disposition as a result of which the value of relevant property comprised in the settlement is less than it would be but for the disposition.

• (2) The amount on which tax is charged under this section shall be—

• (a) the amount by which the value of relevant property comprised in the settlement is less immediately after the event in question that it would be but for the event, or

• (b) where the tax payable is paid out of relevant property comprised in the settlement immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

• (3) The rate at which tax is charged under this section shall be the rate applicable under section 68 or 69 below.

• (4) Subsection (1) above does not apply if the event in question occurs in a quarter beginning with the day on which the settlement commenced or with a ten-year anniversary.

• (5) Tax shall not be charged under this section in respect of—

• (a) a payment of costs or expenses (so far as they are fairly attributable to relevant property), or

• (b) a payment which is (or will be) income of any person for any of the purposes of income tax or would for any of those purposes be income of a person not resident in the United Kingdom if he were so resident,

or in respect of a liability to make such a payment.

• (6) Tax shall not be charged under this section by virtue of subsection (1)(b) above if the disposition is such that, were the trustees beneficially entitled to the settled property, section 10 or section 16 above would prevent the disposition from being a transfer of value.

• (7) Tax shall not be charged under this section by reason only that property comprised in a settlement ceases to be situated in the United Kingdom and thereby becomes excluded property by virtue of section 48ZA.

• (7A) Tax shall not be charged under this section by reason only that property comprised in a settlement is invested in a holding in an authorised unit trust or a share in an open-ended investment company and thereby becomes excluded property by virtue of section 48ZA.

• (7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7C) Tax shall not be charged under this section by reason only that property comprised in a settlement ceases to any extent to be property to which paragraph 2 or 3 of Schedule A1 applies and thereby becomes excluded property by virtue of section 48ZA.

• (7D) Tax shall not be charged under this section where property comprised in a settlement or any part of that property—

• (a) is, by virtue of paragraph 5(2)(a) of Schedule A1, not excluded property for the two year period referred to in that paragraph, but

• (b) becomes excluded property at the end of that period.

• (8) If the condition in subsection (8ZA) is met in relation to property comprised in a settlement, tax shall not be charged under this section by reason only that the property is invested in securities issued by the Treasury subject to a condition of the kind mentioned in section 6(2) above and thereby becomes excluded property by virtue of section 48(4)(b) above.

• (8ZA) The condition is that the settlor—

• (a) is alive and is not a long-term UK resident,

• (b) died on or after 6 April 2025 and was not a long-term UK resident immediately before they died, or

• (c) died before 6 April 2025 and was not domiciled in the United Kingdom when the property became comprised in the settlement.

• (8A) If—

• (a) an amount is payable in respect of property (“the existing property”) comprised in a settlement, and

• (b) the amount represents an accumulation of income which (once accumulated) becomes comprised in the settlement,

subsection (8ZA)(c) has effect, in the case of the amount, as if any reference to the time it became comprised in the settlement were to the time the existing property became comprised in the settlement.

• (9) For the purposes of this section trustees shall be treated as making a disposition if they omit to exercise a right (unless it is shown that the omission was not deliberate) and the disposition shall be treated as made at the time or latest time when they could have exercised the right.

Rates of principal charge

Rate of ten-yearly charge

66

• (1) Subject to subsection (2) below, the rate at which tax is charged under section 64 above at any time shall be three tenths of the effective rate (that is to say the rate found by expressing the tax chargeable as a percentage of the amount on which it is charged) at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (3) below.

• (2) Where the whole or part of the value mentioned in section 64 above is attributable to property which was not relevant property, or was not comprised in the settlement, throughout the period of ten years ending immediately before the ten-year anniversary concerned, the rate at which tax is charged on that value or part shall be reduced by one-fortieth for each of the successive quarters in that period which expired before the property became, or last became, relevant property comprised in the settlement.

• (2A) Subsection (2) above does not apply to property which is regarded as relevant property as a result of section 64(1A) (and accordingly that property is charged to tax at the rate given by subsection (1) above).

• (3) The chargeable transfer postulated in subsection (1) above is one—

• (a) the value transferred by which is equal to an amount determined in accordance with subsection (4) below;

• (b) which is made immediately before the ten-year anniversary concerned by a transferor who has in the preceding seven years made chargeable transfers having an aggregate value determined in accordance with subsection (5) below; and

• (c) on which tax is charged in accordance with section 7(2) of this Act.

• (4) The amount referred to in subsection (3)(a) above is equal to the aggregate of—

• (a) the value on which is charged under section 64 above;

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (c) the value, immediately after a related settlement commenced, of the relevant property then comprised in it;

• (d) the value of any same-day addition; and

• (e) where—

• (i) an increase in the value of the property comprised in another settlement is represented by the value of a same-day addition aggregated under paragraph (d) above, and

• (ii) that other settlement is not a related settlement,

the value immediately after that other settlement commenced of the relevant property then comprised in that other settlement;

but subject to subsection (6) below.

• (5) The aggregate value referred to in subsection (3)(b) above is equal to the aggregate of—

• (a) the values transferred by any chargeable transfers made by the settlor in the period of seven years ending with the day on which the settlement commenced, disregarding transfers made on that day or before 27th March 1974, and

• (b) the amounts on which any charges to tax were imposed under section 65 above in respect of the settlement in the ten years before the anniversary concerned;

but subject to subsection (6) and section 67 below.

• (6) In relation to a settlement which commenced before 27th March 1974—

• (a) subsection (4) above shall have effect with the omission of paragraphs (c) to (e) ; and

• (b) subsection (5) above shall have effect with the omission of paragraph (a);

and where tax is chargeable under section 64 above by reference to the first ten-year anniversary of a settlement which commenced before 9th March 1982, the aggregate mentioned in subsection (5) above shall be increased by the amounts of any distribution payments (determined in accordance with the rules applicable under paragraph 11 of Schedule 5 to the Finance Act 1975) made out of settled property before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the Finance Act 1982 applied, 1st April 1983, or, as the case may be, 1st April 1984) and within the period of ten years before the anniversary concerned.

Added property, etc.

67

• (1) This subsection applies where, after the settlement commenced and after 8th March 1982, but before the anniversary concerned, the settlor made a chargeable transfer as a result of which the value of the property comprised in the settlement was increased.

• (2) For the purposes of subsection (1) above, it is immaterial whether the amount of the property so comprised was increased as a result of the transfer, but a transfer as a result of which the value increased but the amount did not shall be disregarded if it is shown that the transfer—

• (a) was not primarily intended to increase the value, and

• (b) did not result in the value being greater immediately after the transfer by an amount exceeding five per cent. of the value immediately before the transfer.

• (3) Where subsection (1) above applies in relation to a settlement which commenced after 26th March 1974, section 66(5)(a) above shall have effect as if it referred to the greater of—

• (a) the aggregate of the values there specified, and

• (b) the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of seven years ending with the day on which the chargeable transfer falling within subsection (1) above was made—

• (i) disregarding transfers made on that day or before 27th March 1974, and

• (ii) excluding the values mentioned in subsection (5) below;

and where the settlor made two or more chargeable transfers falling within subsection (1) above, paragraph (b) above shall be taken to refer to the transfer in relation to which the aggregate there mentioned is the greatest.

• (4) Where subsection (1) above applies in relation to a settlement which commenced before 27th March 1974, the aggregate mentioned in section 66(5) above shall be increased (or further increased) by the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of seven years ending with the day on which the chargeable transfer falling within subsection (1) above was made—

• (a) disregarding transfers made on that day or before 27th March 1974, and

• (b) excluding the values mentioned in subsection (5) below; and where the settlor made two or more chargeable transfers falling within subsection (1) above, this subsection shall be taken to refer to the transfer in relation to which the aggregate to be added is the greatest.

• (5) The values excluded by subsections (3)(b)(ii) and (4)(b) above are—

• (a) any value attributable to property whose value is taken into account in determining the amount mentioned in section 66(4) above; and

• (b) any value attributable to property in respect of which a charge to tax has been made under section 65 above and by reference to which an amount mentioned in section 66(5)(b) above is determined.

• (6) Where the property comprised in a settlement immediately before the ten-year anniversary concerned, or any part of that property, had on any occasion within the preceding ten years ceased to be relevant property then, if on that occasion tax was charged in respect of the settlement under section 65 above, the aggregate mentioned in section 66(5) above shall be reduced by an amount equal to the lesser of—

• (a) the amount on which tax was charged under section 65 (or so much of that amount as is attributable to the part in question), and

• (b) the value on which tax is charged under section 64 above (or so much of that value as is attributable to the part in question);

and if there were two or more such occasions relating to the property or the same part of it, this subsection shall have effect in relation to each of them.

• (7) References in subsection (6) above to the property comprised in a settlement immediately before an anniversary shall, if part only of the settled property was then relevant property, be construed as references to that part.

Rate before first ten-year anniversary

68

• (1) The rate at which tax is charged under section 65 above on an occasion preceding the first ten-year anniversary after the settlement’s commencement shall be the appropriate fraction of the effective rate at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (4) below (but subject to subsection (6) below).

• (2) For the purposes of this section the appropriate fraction is three tenths multiplied by so many fortieths as there are complete successive quarters in the period beginning with the day on which the settlement commenced and ending with the day before the occasion of the charge, but subject to subsection (3) below.

• (3) Where the whole or part of the amount on which tax is charged is attributable to property which was not relevant property, or was not comprised in the settlement, throughout the period referred to in subsection (2) above, then in determining the appropriate fraction in relation to that amount or part—

• (a) no quarter which expired before the day on which the property became, or last became, relevant property comprised in the settlement shall be counted, but

• (b) if that day fell in the same quarter as that in which the period ends, that quarter shall be counted whether complete or not.

• (4) The chargeable transfer postulated in subsection (1) above is one—

• (a) the value transferred by which is equal to an amount determined in accordance with subsection (5) below;

• (b) which is made at the time of the charge to tax under section 65 by a transferor who has in the period of seven years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to that of any chargeable transfers made by the settlor in the period of seven years ending with the day on which the settlement commenced, disregarding transfers made on that day or before 27th March 1974; and

• (c) on which tax is charged in accordance with section 7(2) of this Act.

• (5) The amount referred to in subsection (4)(a) above is equal to the aggregate of—

• (a) the value, immediately after the settlement commenced, of the relevant property then comprised in it;

• (b) the value, immediately after a related settlement commenced, of the relevant property then comprised in it; ...

• (c) the value, immediately after it became comprised in the settlement, of property which—

• (i) became comprised in the settlement after the settlement commenced and before the occasion of the charge under section 65 above, and

• (ii) was relevant property immediately after it became so comprised,

whether or not the property has remained relevant property comprised in the settlement;

• (d) the value, at the time it became (or last became) relevant property, of property which—

• (i) was comprised in the settlement immediately after the settlement commenced and was not then relevant property but became relevant property before the occasion of the charge under section 65 above, or

• (ii) became comprised in the settlement after the settlement commenced and before the occasion of the charge under section 65 above, and was not relevant property immediately after it became comprised in the settlement, but became relevant property before the occasion of the charge under that section,

whether or not the property has remained relevant property comprised in the settlement;

• (e) the value of any same-day addition; and

• (f) where—

• (i) an increase in the value of the property comprised in another settlement is represented by the value of a same-day addition aggregated under paragraph (e) above, and

• (ii) that other settlement is not a related settlement,

the value immediately after that other settlement commenced of the relevant property then comprised in that other settlement.

• (6) Where the settlement commenced before 27th March 1974, subsection (1) above shall have effect with the substitution of a reference to three tenths for the reference to the appropriate fraction; and in relation to such a settlement the chargeable transfer postulated in that subsection is one—

• (a) the value transferred by which is equal to the amount on which tax is charged under section 65 above;

• (b) which is made at the time of that charge to tax by a transferor who has in the period of seven years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to the aggregate of—

• (i) any amounts on which any charges to tax have been imposed under section 65 above in respect of the settlement in the period of ten years ending with that day; and

• (ii) the amounts of any distribution payments (determined in accordance with the rules applicable under paragraph 11 of Schedule 5 to the Finance Act 1975) made out of the settled property before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the Finance Act 1982 applied, 1st April 1983, or, as the case may be, 1st April 1984) and within the said period of ten years; and

• (c) on which tax is charged in accordance with section 7(2) of this Act.

Rate between ten-year anniversaries

69

• (1) Subject to subsection (2A) below, the rate at which tax is charged under section 65 above on an occasion following one or more ten-year anniversaries after the settlement’s commencement shall be the appropriate fraction of the rate at which it was last charged under section 64 (or would have been charged apart from section 66(2)).

• (2) Subsection (2A) below applies—

• (a) if, at any time in the period beginning with the most recent ten-year anniversary and ending immediately before the occasion of the charge under section 65 above (the “relevant period”), property has become comprised in the settlement which was relevant property immediately after it became so comprised, or

• (b) if—

• (i) at any time in the relevant period, property has become comprised in the settlement which was not relevant property immediately after it became so comprised, and

• (ii) at a later time in the relevant period, that property has become relevant property, or

• (c) if property which was comprised in the settlement immediately before the relevant period, but was not then relevant property, has at any time during the relevant period become relevant property.

• (2A) Whether or not all of the property within any of paragraphs (a) to (c) of subsection (2) above has remained relevant property comprised in the settlement, the rate at which tax is charged under section 65 is to be the appropriate fraction of the rate at which it would last have been charged under section 64 above (apart from section 66(2) above) if—

• (a) immediately before the most recent ten-year anniversary, all of that property had been relevant property comprised in the settlement with a value determined in accordance with subsection (3) below, and

• (b) any same-day addition made on or after the most recent ten-year anniversary had been made immediately before that anniversary.

• (3) In the case of property within subsection (2)(a) above ...

the value to be attributed to it for the purposes of subsection (2A) above is its value immediately after it became comprised in the settlement; and in any other case the value to be so attributed is the value of the property when it became (or last became) relevant property.

• (4) For the purposes of this section the appropriate fraction is so many fortieths as there are complete successive quarters in the period beginning with the most recent ten-year anniversary and ending with the day before the occasion of the charge; but subsection (3) of section 68 above shall have effect for the purposes of this subsection as it has effect for the purposes of subsection (2) of that section.

Special cases—charges to tax

Property leaving temporary charitable trusts

70

• (1) This section applies to settled property held for charitable purposes only until the end of a period (whether defined by a date or in some other way).

• (2) Subject to subsections (3) and (4) below, there shall be a charge to tax under this section—

• (a) where settled property ceases to be property to which this section applies, otherwise than by virtue of an application for charitable purposes, and

• (b) in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by an application of property for charitable purposes) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

• (3) Tax shall not be charged under this section in respect of—

• (a) a payment of costs or expenses (so far as they are fairly attributable to property to which this section applies), or

• (b) a payment which is (or will be) income of any person for any of the purposes of income tax or would for any of those purposes be income of a person not resident in the United Kingdom if he were so resident,

or in respect of a liability to make such a payment.

• (4) Tax shall not be charged under this section by virtue of subsection (2)(b) above if the disposition is such that, were the trustees beneficially entitled to the settled property, section 10 or section 16 above would prevent the disposition from being a transfer of value.

• (5) The amount on which tax is charged under this section shall be—

• (a) the amount by which the value of property which is comprised in the settlement and to which this section applies is less immediately after the event giving rise to the charge than it would be but for the event, or