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Readers’ forum: Ten year inheritance tax charge funding dilemma

20 June 2022
Issue: 4845 / Categories: Forum & Feedback
Discretionary trust

Our client is a discretionary trust whose sole asset is a 57% shareholding in a property investment company. One of the beneficiaries holds the remaining 43% and is also a trustee. The trust is a victim of its own success and faces a ten year charge next year for the first time in 30 years as a result of the continued increase in property values.

The company’s accounts are prepared under UK GAAP and reflect current market value and a full provision for deferred tax. Previous valuations of the shares for inheritance tax have included a 20% discount for lack of full control and also a full tax provision which HMRC has not chosen to dispute but I assume this does not guarantee the same will be true this time.

The trust has no cash reserves and our only obvious means of settling the charge is to pay a...

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