»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp special rate under IHTA84/S54A relates to potentially exempt transfers into interest in possession (IIP) settlements followed by termination of the interest in possession.

FA86, which introduced PETs (IHTM04057) did not include -

• transfers into an interest in possession settlement, or
• claims on the termination of an interest in possession under IHTA84/S52 (1).

»Ê¹ÚÌåÓýappse events were included in the category of PETs by »Ê¹ÚÌåÓýapp Finance (No.2) Act 1987 and the provisions of IHTA84/S54A and IHTA84/S54B , which were brought in at the same time. »Ê¹ÚÌåÓýappse special rate provisions apply to transfers made after 16 March 1987.

Ss54A and B operate to ensure that a settlor with a high personal cumulative total cannot

• by initially using a PET
• take any advantage from putting property on IIP trusts
• for a person with a low personal cumulative total (or none at all)
• where the property, on the later termination of the interest in possession,
• becomes held on discretionary trusts.

In such cases the rate to be used at the claim under IHTA84/S52 (1) on the termination of the interest in possession will be the higher of

• the rate as calculated with the settlor as transferor, and
• the rate as calculated with the life tenant as (deemed) transferor.

»Ê¹ÚÌåÓýapp legislation has changed the behaviour of taxpayers to such an extent that you will very rarely see the point in practice.