Principal or the 10-year charge is a charge on trustees of a relevant property trust on each tenth anniversary after the trust was created. This document discusses the basis of principal charge calculation, elements of the principal charge calculation, and the proforma. It also covers rules on same day addition and treatment of undistributed income.
Points discussed within this guidance note:
> The basis of the principal charge
Calculating the IHT 10 year charge can be complicated as different rules apply depending on whether the trust was created before or after 2015. This note details how to work out which rules apply, then discusses the 10 year charge calculation including the current valuation of the trust property.
> Elements of the principal charge calculation
Once the value of the property is ascertained, the tax is calculated as a percentage of the value. This note explains how to calculate this and gives details of how the nil rate band applies.
> Same day addition
> Undistributed income
> Principal charge proforma
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