RSS feeds‘I see HM Revenue & Customs has made further clarifications on
bare trusts for minors. What has changed and what should I be telling my clients
to do now?’
A settlement for inheritance tax purposes includes a disposition of property
which is held in trust for persons in succession (head A) or held by trustees on
trust to accumulate the whole or part of any income of the property or where the
trustees have power to make payments out of that income at their discretion
(head B).
Fortunately, HMRC has now agreed that where a minor is given property outright this is not a settlement for inheritance tax purposes and therefore a lifetime gift for a minor will be a potentially exempt transfer irrespective of whether s31 is excluded because the gift is not settled property.
S.43(2)(b) is agreed not to be relevant whether or not s.31 of the Trustee Act has been excluded because s.31(2) contains provisions which are essentially administrative in nature rather than dispositive.
The trustees’ discretion in relation to a bare trust for a minor is limited to deciding how much income they spend for the benefit of the beneficiary and how much they retain on the beneficiary’s behalf. If the beneficiary dies before he is 18 he will remain entitled to both the capital and accumulated or retained income, both of which pass according to his intestacy. The inheritance tax treatment of gifts to minors is consistent with the view taken on bare trusts for minors under the capital gains tax and income tax legislation.
Emma Chamberlain, barrister and chair of the CIoT’s capital taxes sub-committee
