Inheritance Tax Act 1984 section 70

Property leaving temporary charitable trusts

Section 70 deals with the inheritance tax charge that arises when property held in a trust established for charitable purposes for a limited period either leaves the trust for non-charitable purposes or is diminished in value by actions of the trustees.

• Property settled on trust for charitable purposes for a limited period is subject to an IHT exit charge if it ceases to be used for charitable purposes or if the trustees make a disposition that reduces its value
• Exemptions apply for payments of trust administration costs and expenses, payments that constitute income for income tax purposes, arm's length transactions and non-gratuitous dispositions
• The tax rate is calculated by aggregating quarterly percentages over the relevant period, starting at 0.25% per quarter for the first ten years and tapering down in stages to 0.05% per quarter, up to a maximum of fifty years (200 quarters)
• The relevant period runs from the later of the date the property entered the temporary charitable trust (or 13 March 1975) to the day before the chargeable event, with quarters during which the property was excluded property being disregarded