Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Interest in possession definition

What does Interest in possession mean? In practice, an interest in possession is a beneficiary’s present right to receive an identifiable share of trust income as it arises, or to use and enjoy trust property (for example, occupation of a house), for the duration of that interest. It contrasts with a discretionary interest, where enjoyment depends on trustees’ decisions. For UK tax and trust law, the expression is not defined exhaustively in legislation; its accepted meaning is the present right to present enjoyment, confirmed by the House of Lords in Pearson v IRC. It is a key concept for the inheritance tax, income...

Interest in Possession Trusts: Qualifying Interests, Beneficial Entitlement versus Relevant Property, and IHT Treatment including IPDIs, DPIs, Pre-2006 IIPs and Transitional Serial Interests

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Practice notes

What is a fixed interest trust/Interest in possession for trust law purposes?

The entitlement a Beneficiary holds in trust property can take the form of a fixed interest, conferring a right to income and/or capital, or it can hinge on the trustees’ exercise of a discretionary power (or that of another holder of a power) to confer benefits, after which the beneficiary acquires a fixed, limited or absolute, interest in the Relevant property. It should be borne in mind that the concepts used in trust law and in tax law do not align; thus an interest in possession (IIP) for trust law purposes will not automatically amount to a qualifying IIP (QIIP) for Inheritance tax (IHT) treatment. If the trust is governed by a system of law other than that of England & Wales, the construction of its terms falls to that governing law, and one should not assume that the expression carries the same meaning as under the law of England & Wales...

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Paul Davies

Clarke Willmott

Paul Davies is a partner in the private client team of Clarke Willmott. He is a solicitor, a chartered tax advisor, and a member of the Society of Trust and Estate Practitioners, as well as being a chartered accountant (albeit no longer practising as such). He specialises in providing advice across the range of different tax and legal issues that face high net worth individuals, executors, and trustees.Paul's work spans all areas of private client work, including wills, trusts of all kind, inheritance tax, succession planning, probate and estate administration, and lasting powers of attorney. Paul acts as a professional trustee for a number of family trusts, and is also regularly called on to act as a professional executor....

Web page updated on 21/05/2026

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