View more on these topics

How’s your grandfather?

Concluding my series on IHT disclosure with a check on grandfathering arrangements

This week’s piece sees the conclusion of my look at the new Dotas extension to certain inheritance tax planning arrangements based on the creation of relevant property but, importantly, excluding grandfathered arrangements. These are substantially arrangements that HM Revenue & Customs already knows about and which were available before April 6, 2011.

To help determine what is and what is not covered by the grandfathering provisions, HMRC published a list. Last week, I put forward the first part of a “TC-edited” list of arrangements from the HMRC list that we felt were likely to be of greatest interest to financial advisers, product providers and platforms.

Last week’s list included DGTs and excluded property trusts and pilot trusts. I got to letter G in my list so this week I will start with H.

H: Transfers on death into relevant property trusts

A transfer into a relevant property trust made under the terms of a person’s will (that is, a discretionary will trust) or paid into a relevant property trust on a person’s death will not require disclosure.

I: Changes in distribution of a deceased’s estate (for example, under a deed of variation or a disclaimer)

In addition, where distributions are made from property settled by will to which s144 relief applies that is, distributions made within two years of death), then disclosure will not be required.

J: Transfers of the nil-rate band every seven years

The transfer of the settlor’s nilrate band into a relevant property trust every seven years (provided there is no other step or steps to the arrangements which enable an advantage to be obtained in respect of the relevant property entry charge) will not be disclosable as the grandfathering provisions will apply.

K: Loan into trust

A transfer into a relevant property trust by way of loan where, other than the establishment of the trust, it is a single-step transaction, will not be disclosable as the grandfathering provisions will apply.

L: Insurance policy trusts

A transfer of the rights to the benefits payable on death into a relevant property trust will not be disclosable even where other benefits, for example critical illness benefits, are payable to the settlor as the grandfathering provisions will apply.

The payment of premiums on a policy settled into a relevant property trust paid by the settlor or other person will not be disclosable as the grandfathering provisions will apply.

M: Making a chargeable transfer followed by a potentially exempt transfer

Where a settlor makes a chargeable transfer prior to a potentially exempt transfer so as to ensure that their full nil-rate band is available for the chargeable transfer, the arrangements are not disclosable unless there are further arrangements so as to allow an advantage to be obtained in respect of the relevant property entry charge as the grandfathering provisions will apply.

P: Pension death benefits
The transfer of pension scheme death benefits into a relevant property trust where the scheme member retains the retirement benefits will not in itself require disclosure. However, where the transfer is part of arrangements which enable an advantage to be obtained in respect of the relevant property entry charge then disclosure may be required. This will depend on whether it can be shown that the arrangements are within the exceptions to disclosure outlined in Regulation 3 (the grandfathering rule).

Q: Reversionary interests

Where property is transferred into a relevant property trust and the settlor retains a reversionary interest then the transfer will not require disclosure as long as it can be shown the grandfathering rule applies.

R: Transfers of value

A disposition is not disclosable where:

  • it is not a transfer of value, and
  • it does not form part of wider arrangements, of which one of the main purposes is to avoid an entry charge.

Examples of arrangements which would not be excluded from disclosure include arrangements where property becomes relevant property and an advantage is obtained in respect of the relevant property entry charge:

  • where the claim that there is no transfer of value relies on a series of transactions where, in the absence of all other intervening steps, there would have been a transfer of value and a relevant property entry charge;
  • where reliefs and exemptions are used in such a way that the arrangements are not covered by the grandfathering rule;
  • where an individual makes a potentially exempt transfer to another person and the arrangements are such that the subject matter of the transfer becomes relevant property then, unless the arrangements are covered by the grandfathering rule, disclosure will be required.

There is some understandable concern that the disclosure rules have been extended to inheritance tax schemes but, in practice, the grandfathering rules will mean that many existing arrangements will escape. In particular, loan trusts, discounted gift trusts, pilot trusts, discretionary will trusts, excluded property trusts and pension trusts are all examples of trusts that advisers will frequently use and that will be covered by the grandfathering rules.

Access full CPD, technical updates and business generation ideas through Techlink Professional. Go to and click the Contact Us link at the top of the screen and then request your free trial from the drop-down menu.


Henderson to launch emerging markets currency fund

Henderson Global Investors will launch a new Emerging Markets Currency fund later this year. The Ucits IV fund will be managed by Bob Arends and has a preliminary launch date scheduled for the third quarter of 2011. The opportunity set includes a number of currencies from Asia, Latin America, Africa and Central and Eastern Europe. […]

Moody’s warns of US downgrade

Ratings agency Moody’s says it expects to place the US under review for a possible downgrade if there is no progress on increasing the statutory debt limit. On Wednesday, the Republicans blocked a bill to raise the cap on total US borrowing. Moody’s says if the debt limit is raised and default avoided, the US […]


FSA names six accredited bodies

The FSA has published the names of the six professional bodies it is likely to grant accredited body status. In its quarterly consultation paper published today the FSA names the six bodies it intends to grant accredited body status as the CFA Society of the UK, the Chartered Institute for Securities and Investment, the Chartered […]

Boxing promoter Barry Hughes in court over mortgage fraud charges

Boxing promoter Barry Hughes and his wife have appeared in court to face charges of mortgage fraud. Hughes and his wife, Jacqueline, are alleged to have lied about income on mortgage applications totalling almost £1.5m, according to reports. The pair denied the charges when they appeared in Glasgow Sheriff Court for a procedural hearing on […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm