IHTM42231 - »Ê¹ÚÌåÓýapp settlement: initial qualifying interest in possession of settlor or spouse

A special rule applies where the settlor or their spouse (or civil partner) had an immediate and qualifying interest in possession (QIIP) in the settled property and a later time the QIIP endsÌý²¹²Ô»åâ€�the settledÌýproperty becomes relevant property.Ìý

»Ê¹ÚÌåÓýapp ruleâ€�(IHTA/S80) is that when neither of the persons above have a QIIP then for the purposes of relevant property chargesâ€�Ìý

  • any continuing settlement is a separate settlement that isâ€�deemedÌýto commence at that later time and â€�Ìý

  • the settlor is the last of those persons to have a QIIP.â€�Ìý

This rule may therefore alter the calculation of the rate of tax on future proportionate and anniversary charges. â€�Ìý

That is because â€�Ìý

  • the historic value in the deemed settlement will be at the value at the later date â€�Ìý

  • the deemed settlor may have a different cumulative total at the later date andâ€�Ìý

  • the deemed settlor may have a different domicileÌýor long-term UK residentÌýstatus, and this may affect the availability of excluded propertyâ€�(see below)â€�Ìý

  • if the deemed settlement commencesÌýon a deathÌýthenâ€�otherÌýsettlements made by the deceased,Ìýe.g. by will, may be related settlements or be treated as same-day additions.â€�Ìý

However, the date of the anniversary charge is not affected. It is stillâ€�determinedÌýby the 10-year cycle based on the first settlement.â€�Ìý

Impact of the rule on excluded propertyâ€�Ìý

If the deemed settlor is not domiciled or is not treated as domiciled in the UKÌýor is not a long-term UK resident at the later datethenÌýtheÌýsettled property may be excluded property. â€�Ìý

However, when the specialÌýrule applies then an additionalÌýdomicileÌýor long-term UK residentÌýtest mustÌýalso be satisfied and guidance onÌýthe test, which has changed over time, is atâ€�IHTM42603.â€�Ìý