Excepted transfers and excepted settlements

30th July 2007

HMRC have issued proposals to update and revise the existing regulations for excepted transfers and settlements to take into account the changes made by the Finance Act 2006 for the inheritance taxation of trusts. There are two documents containing the actual proposals: Excepted transfers and terminations and Excepted settlements.

For excepted settlements, they propose that no return is necessary if the following conditions are satisfied:

the settlement was created on or after 27th March 1974,
there were no related settlements (as defined in s.62 IHTA 1984),
the settlor was domiciled in the UK at the time the settlement was created and throughout the existence of the settlement,
the trustees of the settlement were resident in the UK throughout the existence of the settlement,
a hypothetical value, which equals the value of the assets concerned before the deduction of any available liabilities, exemptions or reliefs, is below a certain cash limit, and
the chargeable event must arise under s.64 or s.65 or, where the calculation is under s. 71F, under s.71E.

As to transfers and terminations of interests in possession, they propose (with examples) to excuse taxpayers from delivering the account required under s.216 IHTA 1984 where:

the value of the asset in the hands of the transferor before the transfer does not exceed a certain limit (before the deduction of any liabilities, exemptions or reliefs),
the value transferred by the chargeable transfer does not exceed a certain limit, and
the cumulative total of all chargeable transfers made by the transferor in the 7 years preceding the current transfer, but including that transfer, should not exceed a certain limit.

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