Inheritance Tax Act 1984 Schedule 4 paragraphs 16–18

Property becoming comprised in maintenance funds

Section 16–18 of Schedule 4 provides relief from the inheritance tax exit charge when property leaves a discretionary trust and either enters a heritage maintenance fund or is transferred by an individual into such a fund shortly after leaving the trust.

• Property that ceases to be relevant property in a discretionary trust and moves directly into a heritage maintenance fund is generally exempt from the exit charge that would otherwise arise under section 65.
• If the value of the property drops on entering the maintenance fund, the exemption is limited: tax is charged only on the amount by which the notional exit charge exceeds the value of the property in the fund (less any consideration the original trustees received).
• Where property leaves a discretionary trust and an individual then makes an exempt transfer of it into a maintenance fund within 30 days (or two years if the exit was triggered by a death), the exit charge is also relieved — provided the individual did not acquire the property for money or money's worth.
• The exemptions do not apply where the maintenance fund trustees acquired their interest through a transaction involving money or money's worth consideration, and the calculations of the chargeable amount exclude business relief, agricultural relief, and the credit in section 65(2)(b).