Corporate settlors can owe unpaid trust inheritance tax

Corporate settlors can be secondarily liable for a trust’s unpaid ten-year inheritance tax charge where the trustees are not UK resident. The Upper Tribunal dismissed Lexgreen Services Limited’s appeal on 31 July 2026, holding that the statutory reference to a transfer made during the settlor’s life can include a company.

Lexgreen established a trust in 2005 with Jersey-resident trustees. HMRC issued a determination against the company in 2020 concerning the trust’s ten-year periodic charge. The appeal addressed a question of statutory interpretation: whether a corporate settlor falls within section 201(1)(d).Nationalarchives It was undisputed that a periodic charge had arisen, that Lexgreen was a settlor and that the trustees were non-resident.

The practical limit is that this is secondary liability. Under section 204(6)(b), a settlor liable under section 201 becomes liable only if the tax remains unpaid after it ought to have been paid.Nationalarchives The tribunal described section 201(1)(d) as a fallback collection mechanism where the trustees have not paid. It applies where the relevant transfer occurs during the settlor’s life and the trustees are not then UK resident. If part of the transferred value is attributable to the tax itself, section 204(6) also limits liability to the amount that would arise if that value were reduced by the unpaid tax.

Lexgreen argued that the principal definition of a chargeable transfer refers to an individual and therefore excluded companies. The tribunal rejected that reading for the special trust charges. Section 2(3) treats occasions such as a ten-year charge as chargeable transfers, even without a real-world transfer by an individual. The periodic charge arises where relevant property is held immediately before the ten-year anniversary; section 201 identifies the persons liable for tax on a chargeable transfer under Part III.

The tribunal held that the word life can refer to the duration of a company’s existence. Section 44(1) defines settlor by reference to any person who makes a settlement, directly or indirectly. It also includes a person who provides funds directly or indirectly for the purpose of or in connection with the settlement. The tribunal saw no reason to limit the fallback recovery right to individual settlors.

On the later amendment, the tribunal accepted the explanatory note’s statement that “this clarifies the existing law”. It therefore declined to infer that a corporate settlor previously lacked a life for this purpose. The decision confirms exposure under the provision applicable to Lexgreen’s earlier trust charge.

The legal basis is the Inheritance Tax Act 1984, sections 2(3), 44, 64, 201(1)(d) and 204(6), as interpreted in Lexgreen Services Limited v HMRC [2026] UKUT 289 (TCC)Nationalarchives.