Warning : Possible IHT charge on creation of a TSI/other IIP for a pre-22 March 2006 life tenant
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HMRC have recently written to a number of firms regarding a possible IHT charge on creation of a TSI/other IIP for a pre-22 March 2006 life tenant. HMRC have recently written to a number of firms expressing the view that, where a pre-22 March 2006 life interest comes to an end and is replaced, before April 2008, by a transitional serial interest in favour of the same life tenant, the provisions of IHTA 1984 section 53(2A) should be read as meaning that an immediately chargeable transfer occurs on that occasion, so that relief under IHTA 1984 section 53(2) is not available. It would seem that, if this view is correct, such a charge would also arise on the creation of other (non-TSI) interests in possession for the pre-22 March 2006 life tenant.
This issue is being raised with HMRC as a matter of urgency, as this view does not appear to be correct, and is inconsistent with the response which HMRC gave to question 6 of the memorandum of questions put to HMRC on Schedule 20 by STEP and CIOT (as published on the CIOT website on 4 April 2007 at: http://www.tax.org.uk/showarticle.pl?id=4761).
At this time, therefore, members will need to consider carefully whether or not they create TSIs or other interests in possession in favour of pre-22 March 2006 life tenants.
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