HMRC have now confirmed in the light of the further advice that they have received, that a lifetime gift on trust for a minor absolutely, whether or not the provisions of section 31 Trustee Act 1925 are excluded, is a potentially exempt transfer. CIOT (Capital Taxes) and other representative bodies have been pressing for clarification since this issue was first raised in December and are pleased that HMRC have now confirmed that an absolute trust of this kind is not a settlement for inheritance tax purposes. HMRC now accept that the beneficiary has an immediate and absolute right to both capital and income, and only the beneficiary’s minority will prevent such beneficiary from being able to require the trustees to convey the trust property to him. The trust property, (including any accumulations of income if section 31 applies), will form part of the beneficiary’s estate for IHT purposes.
The IHT Manual is to be updated shortly.
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