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the other hand, is an "interest in
expectancy" as defined and is ac-
cordingly not " p r ope r t y" for the
purposes of the once-off in-
heritance tax of 3% imposed by
s.103(1) FA 1986: s.106(3) FA
1984 and s. 103(3) FA 1986.
"Policies of assurance upon
human life" are not property to
which the holder becomes "en-
titled in possession" until the
policy either "ma t u r es" or is "sur-
rendered for a consideration in
money or money's worth: s.32(1)
CATA 1976.
It follows from paras, (a) and (b)
of s. 106(3) FA 1984 and s. 103(3)
FA 1986 that when the interests
referred to in para, (a) cease to be
"interests in expectency" and the
policies of assurance upon human
life referred to in para, (b) either
"ma t u r e" or are "surrendered" as
mentioned in s.32(1) CATA 1976
they then become " p r ope r t y" for
the purposes of s. 106(1) and
s. 103(1). This may well result in an
immediate liability to inheritance
tax at 3% by reason of s. 106( 1) (a)
FA 1986 if at that point the
"disponer" in relation to the dis-
cretionary trust is dead and there
are no "principal objects" under
the age of 25 years (see Example
(9) below).
"Discretionary Trusts"
This expression has been amend-
ed by s. 105 FA 1984 to include not
only conventional discretionary
trusts, under which trusts or
powers relating to the distribution
of trust property are vested in
trustees or others exercisable at
their discretion, but also trusts
under which property is held upon
trust to accumulate the trust income
as an addition to the trust property.
The new definition is not as
bizarre as might appear at first
glance. In Ireland, where neither
the Accummulation Act 1800 nor
its modern equivalent s. 166(1)
Law of Property Act 1925 applies,
trust income can normally be
accumulated throughout the entire
trust period of a life in being and 21
years t he r ea f t e r. The former
definition of "discretionary t r us t"
in s.2(1) CATA 1976 did not
extend to an accumulation trust,
and such a trust accordingly
enabled the vesting in possession
of trust property to be postponed
until the end of the trust period in
the same way as a conventional
discretionary t r us t. The new
definition extends the provisions of
s. 106(1) FA 1984 and s. 103(1) FA
1986 to accumulation trusts as
we ll
as
to
conven t i onal
discretionary trusts.
Valuation Date
The date upon which property
subject to a discretionary trust is to
be valued for the purposes of the
once-off inheritance tax of 3%
payable by reason of s. 106(1) FA
1984 is defined in s. 107(b) to be
the later of:-
(i)the "da te of the inheritance",
as determined by whichever is
appropriate of paras, (a), (b) or
(c) of s. 106(1) FA 1984, or
(ii)the "valuation da t e" of the
inheritance deemed under
s. 106(1) FA 1984 to have been
t aken by the t r ust itself,
ascertained in accordance with
s.21 CATA 1976.
In most cases, the appropriate
date will be " t he date of the
i n h e r i t a n c e" de t e rmi ned by
reference to s. 106(1) FA 1986.
The operation of s. 107(b) is best
illustrated by specific examples:-
Example (8)
In 1960 A settles property upon
discretionary trusts for the benefit
J. & E. DAVY
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