Inheritance Tax Act 1984 section 75

Property becoming subject to employee trusts

Section 75 provides an exemption from the inheritance tax exit charge when shares or securities leave a discretionary trust and move into a qualifying employee trust, provided certain conditions are met.

• When company shares or securities move from a discretionary settlement into a qualifying employee trust, no inheritance tax exit charge arises under the normal rules, provided the required conditions are satisfied.
• The trust must benefit all or most of the company's employees, the trust must not permit benefits to flow to participators (broadly, those who control or have a significant interest in the company), the settlor, or persons connected with the settlor, and the ownership conditions of section 28(2) must be met within one year of the transfer.
• The shares or securities must have been held within the original settlement for a continuous period of at least two years immediately before they cease to be relevant property, though where a reorganisation of share capital has taken place, the replacement shares are treated as the same as the original shares for this purpose.
• References to excluded persons and timing are adjusted so that the rules work by reference to the date the property leaves the discretionary trust, rather than the date of any original transfer of value.