Autumn Budget 2018 – Inheritance Tax – trusts settlement definition

This legislation was introduced following the case of Barclays Wealth Trustees (Jersey) & Anor v HMRC (2017).

The issue which arose here was whether there was a single excluded property settlement created with further additions to the trust or whether a new settlement created when the transfer of property to a trust occurred at which point the settlor was a UK domicile.

The government will introduce legislation in the 2019/20 Finance Bill to reflect HMRC’s legal position regarding the IHT treatment of additions to existing trusts.

The legislation will confirm that an addition of assets by UK domiciled (or deemed domicile) individuals to excluded property trusts are not excluded property.

The legislation will apply to IHT charges arising on or after the date on which the 2019/20 Finance Bill receives Royal Assent and is irrespective of whether the additions were made before or after this date.

Further legislative amendments will also be made to ensure that transfers between trusts made after the Royal Assent will be subject to additional excluded property tests.

This will affect trusts where the settlor originally set up an excluded property trust(s) and subsequently settled additional funds to the trust when he/she was UK domicile (or deemed UK domicile) at the time of the addition.