Inheritance Tax Act 1984

[F1 89A Self-settlement by person [F2 expected to fall within the definition of “disabled person”] U.K.

(1) This section applies to property transferred by a person (“A”) into settlement on or after 22nd March 2006 if—

(a) A was beneficially entitled to the property immediately before transferring it into settlement,

(b) A satisfies the Commissioners for Her Majesty's Revenue and Customs that, when the property was transferred into settlement, A had a condition that it was at that time reasonable to expect would have such effects on A as to lead to A becoming [F3 a person falling within any paragraph of the definition of “disabled person” in paragraph 1 of Schedule 1A to the Finance Act 2005].

(c) the property is held on trusts—

(i) under which, during the life of A, no interest in possession in the settled property subsists, and

(ii) which secure that Conditions 1 and 2 are met.

(2) Condition 1 is that if any of the settled property [F4 or income arising from it] is applied during A's life for the benefit of a beneficiary, it is applied for the benefit of A.

(3) Condition 2 is that any power to bring the trusts mentioned in subsection (1)(c) above to an end during A's life is such that, in the event of the power being exercised during A's life, either—

(a) A or another person will, on the trusts being brought to an end, be absolutely entitled to the settled property, or

(b) on the trusts being brought to an end, a disabled person's interest within section 89B(1)(a) or (c) below will subsist in the settled property.

(4) If this section applies to settled property transferred into settlement by a person, the person shall be treated as beneficially entitled to an interest in possession in the settled property.

[F5 (5) For the purposes of subsection (1)(b), assume—

(a) that A will meet any conditions as to residence or presence that are required to establish entitlement to the allowance, [F6 disability assistance,] payment or increased pension in question,

(b) that there will be no provision made by regulations under any of the following—

(i) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCBA 1992,

(ii) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCB(NI)A 1992, and

(iii) sections 85 and 86 of WRA 2012 and the corresponding provision having effect in Northern Ireland, F7 ...

(c) that A will not be prevented from receiving the allowance, payment or increased pension in question by any of the following—

(i) section 113(1) of SSCBA 1992,

(ii) section 113(1) of SSCB(NI)A 1992,

(iii) section 87 of WRA 2012 and the corresponding provision having effect in Northern Ireland,

(iv) articles 61 and 64 of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),

(v) article 53 of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606), and

(vi) article 42 of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011 (S.I. 2011/517) [F8 , F9 ...

(d) that there will be no provision made by regulations under section 31 of the SS(S)A 2018 for the reduction of the value of a payment of disability assistance to £0 when the person is—

(i) resident in a care home,

(ii) resident in an educational establishment,

(iii) undergoing medical or other treatment as an in-patient in a hospital or similar institution, or

(iv) undergoing imprisonment or detention in legal custody.] [F10 , and

(e) that there will be no provision made by regulations under section 31 of the SS(S)A 2018 for the non-satisfaction of eligibility criteria for pension age disability payment in respect of any period when A is undergoing treatment for renal failure in a hospital or similar institution otherwise than as an in-patient.]]

[F11 (6A) The trusts on which the settled property is held are not to be treated as falling outside subsection (2) by reason only of—

(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,

(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).

(6B) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(6C) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(6D) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (6A)(a) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (6B).

(6E) An order under subsection (6D) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(6F) A statutory instrument containing an order under subsection (6D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.]

(7) For the purposes of subsection (3) above, ignore—

(a) power to give directions as to the settled property that is exercisable jointly by the persons who between them are entitled to the entire beneficial interest in the property, and

(b) anything that could occur as a result of exercise of any such power.

[F12 (8) In this section—

• [F13 “disability assistance” means disability assistance given in accordance with regulations made under section 31 of the SS(S)A 2018,]

• [F14 “pension age disability payment” means a category of disability assistance specifically for older people,]

• “SSCBA 1992” means the Social Security Contributions and Benefits Act 1992,

• “SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992, F15 ...

• [F16 “SS(S)A 2018” means the Social Security (Scotland) Act 2018, and]

• “WRA 2012” means the Welfare Reform Act 2012.]]

Textual Amendments

F1 Ss. 89A, 89B inserted (22.3.2006) by Finance Act 2006 (c. 25), s. 156, Sch. 20 paras. 6(1)(3)

F2 Words in s. 89A heading substituted (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(7)

F3 Words in s. 89A(1)(b) substituted (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(2)

F4 Words in s. 89A(2) inserted (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(3)

F5 S. 89A(5) substituted for s. 89A(5)(6) (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(4)

F6 Words in s. 89A(5)(a) inserted (26.7.2021) by The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(a)(i)

F7 Word in s. 89A(5)(b) omitted (26.7.2021) by virtue of The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(a)(ii)

F8 S. 89A(5)(d) and word inserted (26.7.2021) by The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(a)(iii)

F9 Word in s. 89A(5) omitted (21.10.2024) by virtue of The Social Security (Scotland) Act 2018 (Disability Assistance) (Consequential Modifications) Order 2024 (S.I. 2024/1048), arts. 1(2), 7(3)(a)(i)

F10 S. 89A(5)(e) and word inserted (21.10.2024) by The Social Security (Scotland) Act 2018 (Disability Assistance) (Consequential Modifications) Order 2024 (S.I. 2024/1048), arts. 1(2), 7(3)(a)(ii)

F11 Ss. 89A(6A)-(6F) inserted (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(5)

F12 S. 89A(8) substituted (with effect in accordance with Sch. 44 para. 9 of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 7(6)

F13 Words in s. 89A(8) inserted (26.7.2021) by The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(b)(i)

F14 Words in s. 89A(8) inserted (21.10.2024) by The Social Security (Scotland) Act 2018 (Disability Assistance) (Consequential Modifications) Order 2024 (S.I. 2024/1048), arts. 1(2), 7(3)(b)

F15 Word in s. 89A(8) omitted (26.7.2021) by virtue of The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(b)(ii)

F16 Words in s. 89A(8) inserted (26.7.2021) by The Social Security (Scotland) Act 2018 (Disability Assistance, Young Carer Grants, Short-term Assistance and Winter Heating Assistance) (Consequential Provision and Modifications) Order 2021 (S.I. 2021/886), arts. 1(2), 2(2)(b)(iii)