Inheritance Tax Act 1984 section 74

Pre-1981 trusts for disabled persons

Section 74 deals with the inheritance tax treatment of property placed into trust before 10 March 1981 for the benefit of a disabled person, where no interest in possession exists during the disabled person's lifetime, and sets out when a tax charge arises.

• The section applies only to property transferred into settlement before 10 March 1981, held on trusts with no interest in possession, where applied property must be used only or mainly for the benefit of the disabled person during their lifetime.
• A tax charge arises if property leaves the trust other than by way of a payment for the disabled person's benefit, or if the trustees make a disposition (other than such a payment) that reduces the value of the settled property.
• The charging mechanics from section 70(3) to (10) — which deal with property leaving temporary charitable trusts — apply equally to charges under this section, including the flat rate basis of calculation.
• A disabled person is defined as someone incapable of managing their affairs due to mental disorder, someone receiving attendance allowance, or someone receiving the care component of disability living allowance at the highest or middle rate.