Inheritance Tax Act 1984 section 73

Pre-1978 protective trusts

Section 73 deals with the inheritance tax charge that arises on property held in protective trusts where the original protective life interest failed or came to an end before 12 April 1978.

• The section applies only to property held under discretionary trusts that arose from the failure of a protective life interest before 12 April 1978, mirroring the structure set out in section 33 of the Trustee Act 1925.
• A tax charge arises when property leaves the scope of this section, unless the payment is made for the benefit of the original principal beneficiary under the protective trust.
• A tax charge also arises where the trustees make a disposition that reduces the value of the settled property still within the scope of this section, other than a payment for the principal beneficiary's benefit.
• The detailed rules in section 70(3) to (10), covering exceptions, computation, and the treatment of tax charges on property leaving temporary charitable trusts, apply equally to charges under this section.