Inheritance Tax Act 1984 section 89C

Disabled person's interest: powers of advancement etc.

Section 89C ensures that a trust for a disabled person does not lose its favourable inheritance tax treatment merely because the trustees hold certain powers of advancement or can apply limited amounts for purposes other than the direct benefit of the disabled beneficiary.

• A disabled person's trust is not disqualified simply because trustees hold powers of advancement (such as those under the Trustee Act 1925 or the Trustee Act (Northern Ireland) 1958), even where those powers are broader than the standard statutory limitations.
• Trustees may also apply amounts not exceeding the annual limit otherwise than for the benefit of the disabled beneficiary without jeopardising the trust's qualifying status.
• The annual limit is the lower of £3,000 or 3% of the maximum value of the settled property during the relevant 12-month period running from 6 April to 5 April.
• The Treasury has the power, by statutory instrument approved by the House of Commons, to amend the annual limit and to specify circumstances in which the small payments exception does or does not apply.