Inheritance Tax Act 1984 section 72

Property leaving employee trusts and newspaper trusts

Section 72 sets out the circumstances in which an inheritance tax charge arises when property leaves, or payments are made from, employee benefit trusts and newspaper trusts that otherwise benefit from favourable treatment under the Act.

• A flat-rate IHT charge can arise when settled property ceases to qualify as an employee trust, when payments are made to certain specified persons (such as those who funded the trust or significant participators in a close company employer), or when trustees make dispositions that reduce the trust's value.
• No charge arises on payments made to ordinary employees or their dependants who are not connected with the specified persons, reflecting the intended purpose of employee benefit trusts.
• Exemptions from the charge apply for share appropriations under approved profit-sharing schemes and share incentive plans, and where property ceases to qualify as an Employee Ownership Trust solely because trading or controlling interest conditions are no longer met.
• A "specified person" includes anyone who provided trust property (beyond £1,000 per year), a participator in the employing close company holding 5% or more of its shares or entitled to 5% or more of its assets on winding up, or anyone who acquired an interest in the trust property for monetary consideration.