Inheritance Tax

Relevant Property Trusts

Following the Government’s consultation on proposals for changes to the inheritance tax regime for relevant property trusts, a number of measures are to be included in a future Finance Bill:

  • In calculating the rate of inheritance tax for the purposes of the ten-year charge and the exit charge, the requirement to include certain property that is not relevant property is removed for charges arising on or after 6 April 2015.
  • A new rule is introduced, subject to transitional provisions, for ten-year anniversary charges, exit charges and charges on 18/25 trusts arising on or after 6 April 2015. Where property of more than £5,000 is added to two or more relevant property settlements on the same day (and after the commencement of those settlements), then, in calculating the rate of tax for any of those settlements, the value of the property so added to the other settlements, together with the value of property added to those settlements at the date of their commencement, must be brought into account in calculating the rate of tax.
  • The requirement that a claim for conditional exemption must be made and the property designated as heritage property before the ten-year charge is removed so that, for ten-year charges that would otherwise arise on or after the date of Royal Assent to the Finance Act in which the legislation is included, the claim for designation can be made within the two years following the date of the ten-year anniversary.
  • The rules applying to settlements made before 22 March 2006 that give an interest in possession to the settlor or their spouse or civil partner (or surviving spouse or civil partner) are amended. Where, on or after the day after the date of Royal Assent to the Finance Act in which the legislation is included, one party to the couple succeeds to the interest in possession of the other, the settled property will then come within the relevant property trusts regime unless the successor’s interest is an immediate post-death interest, a disabled person’s interest or a transitional serial interest.
  • For deaths on or after 10 December 2014, where property is left in a relevant property trust and an appointment is made of that property to the spouse or civil partner of the testator, that appointment is read back into the will and exemption from inheritance tax can apply even where the appointment is made in the three months following death.

Exemption for Emergency Service Personnel and Humanitarian Aid Workers

Effective for deaths on or after 19 March 2014, IHT will not be charged on the estates of emergency service personnel and humanitarian aid workers whose death has been caused directly or hastened by injury or illness while responding to emergency circumstances. The Government has clarified that the exemption applies to serving and former police officers and service personnel targeted because of their status.

Extending Exemption for Medals and Other Awards

The exclusion from inheritance tax that applies to medals and other decorations that are awarded for valour and gallantry is extended to all decorations and medals awarded by the Crown or by another country or territory outside the UK to the armed forces, emergency service personnel and to individuals in recognition of their achievements and service in public life. The extension is effective in relation to transfers of value made or treated as made on or after 3 December 2014.

Interest Changes to Support the New Digital Service

Legislation will be introduced in a future Finance Bill to provide for a new inheritance tax online service. Draft regulations to facilitate the use of electronic communications will be published shortly after the Budget. It was announced at Autumn Statement that future regulations would also update the instalment interest provisions relating to certain financial institutions and companies, and clarify the period from when interest is charged. The amendments will come into force on an appointed day to be specified in regulations. This is expected to be at the same time as the new online service becomes available.