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United Kingdom

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Key definition

Interest definition

What does Interest mean? Interest is the additional sum payable for the time‑value of money: the amount a borrower pays a lender for using money, the return on debt‑type investments, and the sum awarded for being kept out of funds in litigation. Entitlement arises by: - Contract (contractual interest), including default interest, fixed or floating rates (for example, over base rate or SONIA), and simple or compound interest. Clauses must be clearly drafted and not operate as an unlawful penalty or unfair term. - Statute (statutory interest), for example late payment interest on commercial debts under the Late Payment of Commercial Debts (Interest) Act...

IHT on appointing multi-life IIP/IPDI to a discretionary trust: single or multiple settlements?

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Interest in possession (IIP) in settled property

For the purposes of the Inheritance Tax Act 1984, an individual who is beneficially entitled to an interest in possession (IIP) in settled property is regarded as beneficially entitled to the underlying trust assets in which that Interest exists. However, where that IIP first arises on or after 22 March 2006, IHTA 1984, s 49(1A) limits this deeming rule so that it applies to that interest only if, and only for so long as, the interest is one of the following categories:

an immediate post-death interest
a disabled person’s interest, or
a transitional serial interest or falls within IHTA 1984, s 5(1B)

Accordingly, IHTA 1984, s 50 explains the position where a person within s 49(1) has a right to only part of the income (if any) of trust property. In that situation, the deemed interest in the entirety of the trust property is in the same proportion as the part of the income to which that person is entitled bears to the whole of the income...

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