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Inheritance Tax Regulations 2002 come into force...

The Inheritance Tax (Delivery of Accounts) (Excepted transfers and excepted Termination) Regulations 2002 (SI 2002/1731) have been passed by parliament and come into force from 1 August 2002.

10 October 2002

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The Regulations replace the Capital Transfer Tax (Delivery of Accounts) Regulations 1981 (SI 1981/1440). The Regulations dispense with the need to deliver an account of lifetime transfers where the total value of an individual’s transfers made in any one year does not exceed £10,000, and where his cumulative total does not exceed £40,000. They effect lifetime transfers made on or after 1 April 1981.

The Regulations also dispense with the requirement for Trustees to deliver an account and discharge them any liability to IHT where the termination of an interest in possession in settled property is wholly covered by an annual or marriage gift exemption made available to the Trustees.

The Inheritance Tax (Delivery of Accounts) (Excepted Settlements) Regulations 2002 (SI 2002/1732) comes into force at the same time. The Regulations dispense with the need to deliver an account of the property comprised in a limited class of small discretionary trusts where a chargeable event occurs on or after 6 April 2002. These trusts are defined as ‘excepted Settlements’. As such no interest in possession must subsist in the settled property comprised solely of cash, the trustees must be UK resident and the settlor must not have added to the settled property once it has started or have created any other settlements on the same day and the value of the settled property must not exceed £1,000 at the time of the chargeable event.

The Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2002 (SI 2002/1733) the final in the series of regulations makes alterations to the definition of excepted estate in the following way:

  1. The limit on the aggregate of the gross value of the deceased’s estate and of the value transferred by any ‘specified transfers’ made by the deceased is raised from £210,000 to £220,000 as from 1 August 2002;
  2. Up to £100,000 of this value may be attributable to settled property in which the deceased was entitled to an interest in possession;
  3. The limit on the value if the property situated outside the UK, which may form the part of the deceased’s estate is raised from £50,000 to £75,000;
  4. The limit of the aggregate value of chargeable transfers that are specified transfers made during the period of seven years ending with the deceased’s death is raised from £75,000 to £100,000;
  5. The definition of ‘specified transfers’ is extended to include a transfer of an interest in land and furnishings and chattels disposed of at the same time to the same person, which is intended to be enjoyed with the land save as to the extent that the property transferred is property subject to a reservation of benefit to which section 102 of the Finance Act 1986 applies or becomes settled property;
  6. A new category of excepted estates is introduced for persons who have never been domiciled or treated as domiciled in the UK. The value of such estate situated in the UK must be attributable to cash or quoted shares or securities which in aggregate do not exceed the gross value of £100,000.

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