Qualifying interest in possession (QIIP) meaning

Trust property that carries a qualifying interest in possession (QIIP) can become liable to inheritance tax (IHT) in these circumstances: when the life tenant (the beneficiary holding the interest in possession) dies where the life tenant dies within seven years of a transfer or a lifetime ending of their interest following a transfer or conversion of the interest into a non-qualifying or discretionary interest For more on QIIPs, see Practice Note: The meaning of qualifying interest in possession. Property over which a QIIP subsists is not relevant property, so it is not exposed to principal and exit charges during the trust’s life. See Practice Note: The meaning of relevant property for details. Death of the beneficiary with the qualifying interest in possession On the death of the beneficiary with the QIIP (the life tenant), the trust property is valued and included within the deceased’s estate, and the IHT estate charge is imposed on that property (as well as any other...

Private Client England & Wales glossary A Abatement When, after settling the deceased’s funeral costs, debts and liabilities, the remaining estate cannot satisfy all legacies in full, the gifts are reduced accordingly, unless the Will shows a different intention. In a solvent estate, the order for reduction appears in Part II of Schedule 1 to the Administration of Estates Act 1925. Refer to Practice Note: Payment of legacies. Accruals basis Where income is taxed on an accruals basis, it is attributed to a given tax year by reference to the number of days within that year during which the activity giving rise to the liability accrued. See Practice Note: What is the basis of income tax?. Accumulation and maintenance (A&M) trust A form of non‑interest in possession trust designed to benefit children and young people up to 25, which received favourable inheritance tax treatment between 1975 and 2006. See Practice Note: Accumulation and maintenance trusts—IHT [Archived]. Accredited Legal Representative (ALR) ...

IHT—residence nil rate band Q&As This Practice Note is designed to direct practitioners to Q&As and worked examples explaining the rules by which the inheritance tax (IHT) residence nil rate band (RNRB)—also called the additional threshold—and the transferable RNRB (brought-forward allowance) are worked out and applied on deaths occurring on or after 6 April 2017. For an overview of the RNRB, see Practice Note: IHT—residence nil rate band. Note that while new Q&As are added as they arise, individual Q&As are not updated and reflect the law as at the date shown in each instance. In particular, Q&As dated before 6 April 2025 are likely to discuss the domicile-based IHT regime, rather than the residence-based regime in force from that date. For details on the basic nil rate band (NRB) and the transferable NRB, and especially how to claim these reliefs and the key deadlines, see Practice Notes: IHT—nil rate band (NRB) and transferable NRB and IHT—calculation of nil rate band and transferable NRB. Identifying the qualifying residential...

It has been assumed that: A’s entitlement under the trust to a 50% interest in the property constitutes a qualifying interest in possession (QIIP) A’s trust interest is not within section 5(1B) of the Inheritance Tax Act 1984 (IHTA 1984) Releasing A’s interest in possession will bring the trust to an end B is not a settlor of the trust The cessation of the QIIP, together with A’s gift of the remaining 50% share, each amounts to a potentially exempt transfer (PET) by A. These transfers become chargeable to IHT if A were to die within seven years. See Practice Note: Qualifying interest in possession trusts—IHT treatment, especially the section ‘Ending of an interest in possession during beneficiary’s lifetime’. Taper relief, as well as A’s available nil rate band, may operate to lessen any IHT payable...