IHTM42231 - The settlement: initial qualifying interest in possession of settlor or spouse

A special rule applies鈥痺here the settlor or their spouse (or civil partner)鈥痟ad an immediate and qualifying interest in possession (QIIP) in鈥痶he鈥痵ettled鈥痯roperty鈥痑nd a later time the鈥疩IIP ends听补苍诲鈥�the settled听property becomes relevant property.听

The rule鈥�(IHTA/S80)鈥痠s that when neither of the persons above have a QIIP then for the purposes of relevant property charges鈥�听

  • any continuing settlement鈥痠s鈥痑 separate settlement that is鈥�deemed听to鈥痗ommence at that later time and鈥��听

  • the settlor is the last of those persons to have a QIIP.鈥�听

This rule may therefore alter鈥痶he calculation of the rate of tax on鈥痜uture鈥痯roportionate and anniversary charges.鈥��听

That is because鈥��听

  • the historic value in the鈥痙eemed鈥痵ettlement will be at the鈥痸alue at鈥痶he later鈥痙ate鈥��听

  • the deemed settlor may have a different cumulative total鈥痑t the later date鈥痑nd鈥�听

  • the deemed settlor may have a different domicile听or long-term UK resident听status,鈥痑nd this may affect the availability of excluded property鈥�(see below)鈥�听

  • if the deemed settlement commences听on a death听then鈥�other听settlements made by the deceased,听e.g. by will, may be related settlements or鈥痓e treated as鈥痵ame-day additions.鈥�听

However, the date of the anniversary charge is not affected.鈥疘t is still鈥�determined听by鈥痶he 10-year鈥痗ycle鈥痓ased on the鈥痜irst settlement.鈥�听

Impact of the rule on excluded property鈥�听

If the deemed settlor is not domiciled or鈥痠s鈥痭ot treated as domiciled in the鈥疷K听or is not a long-term UK resident鈥痑t the later datethen听the听settled property may be excluded property.鈥��听

However, when the special听rule applies then an additional听domicile听or long-term UK resident听test must听also be satisfied and guidance on听the test, which has changed over time, is at鈥�IHTM42603.鈥�听