33 Release of limited interests, etc.

Summary

This section deals with the termination of limited interests (e.g. life interests) before the time when such interests are limited to cease. Where the limited interest comes to an end before the event on which it is limited to cease happens (e.g. before the death of a life tenant), tax is payable as if the event had happened.

Details

(1) “event” includes—

• a death, and
• the expiration of a specified period.

(2) Where an interest in property, which is limited by the disposition which created it to cease on an event, comes to an end before the time when that limited interest is to cease, tax will be payable as if the person who had the limited interest had died immediately before the coming to an end of the interest.

3 common examples of early termination of limited interests are as follows:

• where the life tenant acquires a remainder interest;
• where the remainderman acquires the preceding life interest; and
• where the parties to a settlement agree to terminate the trust by dividing the trust funds between them.

(3) The provisions of subsection (2) will not prejudice any charge to tax arising under a disposition made by a person other than the original disponer. [Section 103 ensures that property in respect of which tax is chargeable more than once on the same event will not be included more than once in respect of that event – see note on that section.]

(4) A double charge to tax does not arise where a person settles property on himself/herself for his/her life and that person surrenders his/her life interest during his/her lifetime.

Relevant Date: Finance Act 2015