Section 68 Rate before first ten-year anniversary.

United Kingdom

(1)

The rate at which tax is charged under section 65 above on an occasion preceding the first ten-year anniversary after the settlement’s commencement shall be the appropriate fraction of the effective rate at which tax would be charged on the value transferred by a chargeable transfer of the description specified in subsection (4) below (but subject to subsection (6) below).

(2)

For the purposes of this section the appropriate fraction is three tenths multiplied by so many fortieths as there are complete successive quarters in the period beginning with the day on which the settlement commenced and ending with the day before the occasion of the charge, but subject to subsection (3) below.

(3)

Where the whole or part of the amount on which tax is charged is attributable to property which was not relevant property, or was not comprised in the settlement, throughout the period referred to in subsection (2) above, then in determining the appropriate fraction in relation to that amount or part—

(a)

no quarter which expired before the day on which the property became, or last became, relevant property comprised in the settlement shall be counted, but

(b)

if that day fell in the same quarter as that in which the period ends, that quarter shall be counted whether complete or not.

(4)

The chargeable transfer postulated in subsection (1) above is one—

(a)

the value transferred by which is equal to an amount determined in accordance with subsection (5) below;

(b)

which is made at the time of the charge to tax under section 65 by a transferor who has in the period of F1seven years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to that of any chargeable transfers made by the settlor in the period of F2seven years ending with the day on which the settlement commenced, disregarding transfers made on that day or before 27th March 1974; and

F3(c)

on which tax is charged in accordance with section 7(2) of this Act.

(5)

The amount referred to in subsection (4)(a) above is equal to the aggregate of—

(a)

the value, immediately after the settlement commenced, of the F4relevant property then comprised in it;

(b)

the value, immediately after a related settlement commenced, of the F5 relevant property then comprised in it; F6...

F7(c)

the value, immediately after it became comprised in the settlement, of property which—

(i)

became comprised in the settlement after the settlement commenced and before the occasion of the charge under section 65 above, and

(ii)

was relevant property immediately after it became so comprised,

whether or not the property has remained relevant property comprised in the settlement;

(d)

the value, at the time it became (or last became) relevant property, of property which—

(i)

was comprised in the settlement immediately after the settlement commenced and was not then relevant property but became relevant property before the occasion of the charge under section 65 above, or

(ii)

became comprised in the settlement after the settlement commenced and before the occasion of the charge under section 65 above, and was not relevant property immediately after it became comprised in the settlement, but became relevant property before the occasion of the charge under that section,

whether or not the property has remained relevant property comprised in the settlement;

(e)

the value of any same-day addition; and

(f)

where—

(i)

an increase in the value of the property comprised in another settlement is represented by the value of a same-day addition aggregated under paragraph (e) above, and

(ii)

that other settlement is not a related settlement,

the value immediately after that other settlement commenced of the relevant property then comprised in that other settlement.

(6)

Where the settlement commenced before 27th March 1974, subsection (1) above shall have effect with the substitution of a reference to three tenths for the reference to the appropriate fraction; and in relation to such a settlement the chargeable transfer postulated in that subsection is one—

(a)

the value transferred by which is equal to the amount on which tax is charged under section 65 above;

(b)

which is made at the time of that charge to tax by a transferor who has in the period of F8seven years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to the aggregate of—

(i)

any amounts on which any charges to tax have been imposed under section 65 above in respect of the settlement in F9the period of ten years ending with that day; and

(ii)

the amounts of any distribution payments (determined in accordance with the rules applicable under paragraph 11 of Schedule 5 to the M1Finance Act 1975) made out of the settled property before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the M2Finance Act 1982 applied, 1st April 1983, or, as the case may be, 1st April 1984) and within the said period of ten years; and

F10(c)

on which tax is charged in accordance with section 7(2) of this Act.

Annotations

Textual amendments

F1

Finance Act 1986 Sch. 19 para. 18(1),with effect from 18March 1986.Originally

“ten”.

F2

Finance Act 1986 Sch. 19 para. 18(1),with effect from 18March 1986.Originally

“ten”.

F3

Finance Act 1986 Sch. 19 para. 18(2),with effect from 18March 1986.Originally

“(c) for which the appropriate Table of rates is the second Table in Schedule 1 to this Act.”.

F4

Word in s. 68(5)(a) inserted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 1 para. 4(a)

F5

Word in s. 68(5)(b) inserted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 1 para. 4(a)

F6

Word in s. 68(5) omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 1 para. 4(b)

F7

S. 68(5)(c)-(f) substituted for s. 68(5)(c) (with effect in accordance with Sch. 1 para. 7 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 1 para. 4(c)

F8

Finance Act 1986 Sch. 19 para. 18(3)(a),with effect from 18March 1986.Originally

“ten”.

F9

Finance Act 1986 Sch. 19 para. 18(3)(b),with effect from 18March 1986.Originally

“that period of ten years”.

F10

Finance Act 1986 Sch. 19 para. 18(2),with effect from 18March 1986.Originally

“for which the appropriate Table of rates is the second Table in Schedule 1 to this Act.”

Marginal citations

M1: 1975 c. 7.
M2: 1982 c. 39.

Notes on the whole Act

Textual amendments

F1: By Finance Act 1986 s. 100(1), on and after 25 July 1986 the Capital Transfer Tax Act 1984 may be cited as the Inheritance Tax Act 1984.

Notes on Chapter III

Textual amendments

F1: Words in Pt. 3 Ch. 3 heading added (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 para. 20(5)

Modifications

C1

See Finance Act 1990 s. 126—exemption for pools payments to trustees for football ground improvements in respect of events on or after 6April 1990.

C2

Pt. 3 Ch. 3 modified (22.7.2004) by Finance Act 2004 (c. 12), s. 283, Sch. 36 para. 57(1) (with s. 283(5))

C3

Pt. 3 Ch. 3 modified (22.7.2004) by Finance Act 2004 (c. 12), s. 283, Sch. 36 para. 56(2)(b) (with s. 283(5))

C4

Part III Chapter III (ss.58-85) excluded by Finance Act 1991 (c.31, SIF 63:1), s. 121(4).

Pt. III Ch. III (ss. 58-85) restricted (3.5.1994) by 1994 c. 9, s. 248