Section 124H — Inheritance Tax Act 1984: Trust maximum allowance

Trust maximum allowance 124H 1 The trust maximum allowance for an occasion on which tax is chargeable under section 64 or 65 in relation to a settlement (“the relevant settlement”), other than a qualifying pre-commencement settlement (within the meaning of section 124I), is the sum of transferred allowance amounts the relevant settlement has acquired.

2 The relevant settlement acquires a transferred allowance amount if—

a there is a chargeable transfer of qualifying relievable property that results in the property becoming comprised in the relevant settlement, or b tax is charged as if there was a transfer of value of qualifying relievable property comprised in the relevant settlement as a result of section 4(1) (transfers on death) or section 52(1) (charge on termination of interest in possession).

3 The transferred allowance amount in relation to a transfer (or deemed transfer) is equal to so much of the value of the qualifying relievable property as does not exceed the maximum allowance cap in relation to it (and if the cap is nil or less, no transferred allowance amount is acquired).

4 The maximum allowance cap in relation to qualifying relievable property is equal to—

a £2.5 million, less b the sum of transferred allowance amounts previously acquired by—

i the relevant settlement, or ii any other settlement made by the settlor of the relevant settlement.

5 But where more than one transfer referred to in subsection (2)(a) or (b), occurs (or is deemed to occur for the purpose of charging tax) on the same day, the maximum allowance cap is allocated between the qualifying relievable property that is the subject of each transfer in proportion to their value.

6 Property is qualifying relievable property to the extent that on its transfer (or deemed transfer)—

a it becomes relevant property, and b the value of the transfer is treated as reduced as a result of section 104(1A) or 116(1A).

7 For the purposes of this section, the value of qualifying relievable property is equal to so much of the amount of the value transferred on its transfer (or deemed transfer) as is treated as reduced as a result of section 104(1A) or 116(1A).

8 The determination of whether property is qualifying relievable property, and its value, is to be made as it would be made at the time of the transfer (and accordingly ignoring the occurrence of any subsequent events).

9 In this section and in section 124I “ relevant property ” has the meaning it has in Chapter 3 of Part 3 (see section 58).