Inheritance Tax Act 1984 section 65

Charge at other times

Section 65 sets out the circumstances in which an inheritance tax charge arises on relevant property held in a discretionary trust at times other than the ten-year anniversary, and the exemptions that apply.

• A tax charge arises when property leaves the trust (or ceases to be relevant property) or when trustees make a disposition that reduces the value of relevant property in the settlement.
• The amount charged is the loss in value of the relevant property caused by the event, with a grossing-up calculation available where tax is paid from the trust fund itself.
• Certain events are exempt, including payments of trust expenses, distributions that constitute income for income tax purposes, events occurring in the first quarter after the settlement started or after a ten-year anniversary, and arm's length or agricultural tenancy transactions.
• No charge arises merely because property becomes excluded property — for example, by moving outside the UK, being invested in qualifying Treasury securities, or ceasing to be non-excluded overseas property — provided the relevant conditions regarding the settlor's domicile or long-term UK residence status are met.