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.
Trustees of a relevant property trust are charged to inheritance tax on each tenth anniversary after the trust was created. This charge is known as any of the following:
- the principal charge
- the periodic charge
- the 10 year charge
- the decennial charge
IHTA 1984, s 64(1)
This guidance note explains how to work out the amount of tax payable. It applies to occasions of charge on or after 18 November 2015, which was the date of Royal Assent of the second Finance Act of 2015. F(No 2) A 2015 amended the rules for calculating the principal charge. The former rules are outlined in the Calculation of principal (10 year) charge before 18 November 2015 guidance note.
See the Relevant property guidance note for an explanation of what relevant property is and how the date of the anniversary is determined.
The calculation of periodic and exit charges on relevant property has long been recognised as problematic. Not only is the calculation itself complex but it can be difficult to find out all the information required.