Finance Act, 1986

Annual acquisitions by discretionary trusts.

103.—(1) Where, in any year commencing with the year 1986, under or in consequence of any disposition, property is subject to a chargeable discretionary trust on the chargeable date, the trust shall be deemed on each such date to become beneficially entitled in possession to an absolute interest in that property, and to take on each such date an inheritance accordingly as if the trust, and the trustees as such for the time being of the trust, were together a person for the purposes of the Principal Act, and each such chargeable date shall be the date of such inheritance.

(2) (a) Where—

(i) under or in consequence of any disposition, property was subject to a discretionary trust prior to a chargeable date,

(ii) that property is not on that chargeable date subject to that discretionary trust (being on that date a chargeable discretionary trust) because such property is on that date property to which for the time being a person is beneficially entitled for an interest in possession, and

(iii) on that chargeable date that property is property which is limited to become subject again to that chargeable discretionary trust, or will do so by the exercise of a power of revocation,

that property shall be deemed to be subject to that chargeable discretionary trust on that chargeable date if that interest in possession is an interest which is revocable or which is limited to cease on an event other than—

(I) the death of that person, or

(II) the expiration of a specified period, where that interest is taken by that person under a power of appointment contained in that disposition and is, at the time of the appointment thereof, an interest for a period certain of five years or more.

(b) In this subsection, “property” includes property representing such property.

(3) For the purposes of this section—

(a) an interest in expectancy shall not be property until an event happens whereby the interest ceases to be an interest in expectancy or is represented by property which is not an interest in expectancy;

(b) an interest in a policy of assurance upon human life shall not be property until, and then only to the extent that, the interest becomes an interest in possession under the provisions of section 32 of the Principal Act or is represented by property which is not an interest in expectancy.

(4) This section shall not apply or have effect in relation to property which is subject to a chargeable discretionary trust on a chargeable date if that property or property representing that property is subject to a charge for tax arising under or in consequence of the same disposition by reason of the provisions of section 106 of the Finance Act, 1984 , on that same date or within the year prior to that date.