BrassTax news

If you go down to the woods today...

...you’re in for a pleasant surprise.

HMRC have recanted their previously stated view that “bare” trusts for minors are settlements within IHTA 1984 s43. Under this view lifetime transfers to them were immediately chargeable for inheritance tax purposes rather than potentially exempt and the assets held on such trusts were within the “relevant property” regime that imposes ten-year and periodic or “exit” charges.

Accordingly, under the new view, gifts on bare trusts for minors will remain Potentially Exempt Transfers that will be subject to IHT only if the donor dies within seven years. Of course, the beneficiary under a bare trust will be able to call for the assets at age 18; that might have other consequences which may be unwelcome to the settlor.

There remains an element of doubt about the effect of Trustee Act 1925 s31; we think that it is better for any bare trust deed to exclude its operation.