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Associated operations

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance

Associated operations

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance
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Under the inheritance tax rules, a settlor makes a disposition of his property where he transfers ownership of it to another person. In addition, a disposition is also made where it is effected by associated operations.

So where associated operations result in a transfer of the beneficial ownership of property by the settlor and a fall in the value of his estate, he is treated as having made a disposition resulting in a transfer. That transfer is either a chargeable lifetime transfer (CLT) subject to the lifetime charge to IHT or a potentially exempt transfer (PET).

The rules on associated operations exist in order to prevent the avoidance of IHT by the means of splitting a single transfer into a series of transactions in order to reduce the amount of IHT due. The rules will only apply in cases which would not be regarded as a disposition of property in its ordinary sense.

For example in Rysaffe Trustee Co, a settlor made five discretionary trusts and transferred shares to each trust. HMRC argued

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