IHTM45051 - Reduced rate for gifts to charity: other issues: charges arising following the deferral of tax for woodlands or conditional exemption

Where a charge arises following the deferral of tax due to a claim for woodlands relief (IHTM04121) or conditional exemption (IHTM04111) it would be possible for the reduced rate to apply if either there was 鈥榰nused鈥� charity exemption when the original tax calculations were made, or as a result of changes in the rate of tax under IHTA84/Sch2. These 鈥榬ecapture鈥� charges generally arise where the beneficiary has sold the assets on which the charge was deferred. Consequential amendments in IHTA84/Sch1A prevent the reduced rate applying whenever a recapture charge arises, so such charges are always liable to tax at 40% and calculated as the top slice of the estate in the normal way. The specific provisions are

  • FB12/Sch33/Para 4 inserts IHTA84/S33(2ZA) to disapply the reduced rate when calculating charges under IHTA84/S33 (conditional exemption),
  • FB12/Sch33/Para 5 amends IHTA84/S78(3) to refer to IHTA84/S33(2ZA) so disapplying the reduced rate when calculating charges under IHTA84/S78 (chargeable occasion with relevant property trusts),
  • FB12/Sch33/Para 6 renumbers IHTA84/S128 as subsection (1) and inserts IHTA84/S128(2) to disapply the reduced rate when calculating charges under IHTA84/S128 (woodlands), and
  • FB12/Sch33/Para 8 inserts IHTA84/Sch4/Para 14(2A) to disapply the reduced rate when calculating charges under IHTA84/Sch4/Para 14 (maintenance funds).