bn 25

[John__]

Couple of queries about this budget note:

1) Does existing capital in a IIP trust maintain its exemption from the 10 year charge until the interest in possession is transferred or cash resettled?

if so:

2) If cash is added today to the trust does this mean the entire capital is now subject to the 10 yr charge or merely the portion added since the rules changed or perhaps none at all? (I know the added amount is now a CLT)

Thanks!

[Anthony Nixon]

1. Yes the existing capital in an IIP trust remains subject to the old rules (so no 10 year charges) for as long as the IIP lasts.

2. If cash is added now that added cash, and assets representing it in future, will be within the 10 year charge regime. But that will have no effect on the existing capital in the trust and assets representing that existing capital while the existing IIP lasts.

Anthony Nixon
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner
Partner, Lester Aldridge Solicitors
Southampton

Tel: 023 8082 0442
Email: anthony.nixon@la-law.com
Website:www.lester-aldridge.com

[John__]

Thank you for your reply - is there some guidance from the IR on this matter, my concern is:

If a lump sum was put into an investment portfolio it would be hard in 10yrs to differentiate the portion falling under this charge with the portion that wouldn't - even ignoring the case where cash was drip fed in over a few years.

[colinefbarrett]

Hi Anthony

with regard to your answer to point (1) raised by John, does the situation change for exisitng IIP trusts after 6th April 2008? ie, after that date, are funds already settled into an IIP trust prior to 22 March 2006 subject to the periodic charge? Grateful if you could clarify.

Thanks
Colin

[John__]

Colin,

My understanding from the budget note is that the property is not relevant property until the IIP ends (either on death or on transfer of interest):

BN 25 par 10:
"The curent rules for IIP trusts will run on until the interest in the trust property as at 22 March 2006 comes to an end..."

[colinefbarrett]

thanks for the clarification!

Colin