Inheritance Tax Act 1984 section 55A

Purchased settlement powers

Section 55A deals with the inheritance tax consequences when a person purchases a settlement power — that is, pays money or gives other consideration to acquire the ability to control or influence how a trust operates.

• Buying a settlement power for money or money's worth is automatically treated as a transfer of value for inheritance tax purposes, regardless of whether it was intended to confer a gratuitous benefit
• The value transferred is calculated by ignoring the value of whatever the purchaser receives — meaning no credit is given for the settlement power acquired
• Key inheritance tax exemptions are disapplied, including the spouse or civil partner exemption, and exemptions for gifts to charities, political parties, housing associations and maintenance funds for historic buildings
• A person is treated as acquiring a settlement power not only by obtaining the power itself, but also by gaining the ability to exercise, prevent, or restrict the exercise of such a power, whether directly or indirectly

---