August 6, 2026
The Upper Tribunal has confirmed that a corporate settlor may be secondarily liable for an unpaid ten-year inheritance tax charge where non-UK trustees fail to pay.
Separate legal personality does not prevent a company from remaining within HMRC’s recovery chain when tax due from non-resident trustees goes unpaid.
Lexgreen Services Limited established a trust in 2005 with trustees resident in Jersey. A ten-year periodic inheritance tax charge later arose under the relevant-property regime. The trustees did not pay the tax, and in 2020 HMRC issued a determination treating Lexgreen as liable in its capacity as settlor.
The dispute did not concern whether the periodic charge arose, whether Lexgreen was a settlor or whether the trustees were non-UK resident. The single issue was whether section 201(1)(d) of the Inheritance Tax Act 1984 could apply to a company at all.
That provision includes the settlor among the persons liable where a transfer under the settled-property rules occurs during the life of the settlor and the trustees are not resident in the United Kingdom. Lexgreen argued that a company may exist, but it is not alive. On that reading, the statutory phrase excluded corporate settlors.
Lexgreen also relied on the familiar proposition in section 2(1) of the 1984 Act that a chargeable transfer is a transfer of value made by an individual. If only an individual can make a chargeable transfer, the company argued, inheritance tax could not be imposed on it without an express rule.
The Upper Tribunal rejected that argument by distinguishing the Act’s main charging provisions from its special charging provisions for relevant-property trusts. A ten-year charge is not dependent on a real-world disposition by an individual at the anniversary date. Sections 2(3) and 3(4) treat the statutory occasion of charge as a chargeable transfer for the purposes of the Act.
That architecture is central to the decision. The company was not being taxed because it had made a new lifetime gift at the ten-year anniversary. It was being pursued under a provision identifying persons liable for tax that had already arisen under the special trust regime.
Section 44 defines a settlor by reference to any person who made the settlement or provided funds for it. Under the Interpretation Act 1978, a “person” generally includes a body corporate unless the context indicates otherwise. The starting point was therefore that a company can be a settlor.
The harder question was whether the words “during the life of the settlor” showed that Parliament intended to narrow the provision to natural persons. The Upper Tribunal concluded that they did not.
In ordinary usage, the life of a company can mean the duration of its existence. Courts and commercial documents routinely refer to the continuing life, short life or termination of a company. The phrase therefore had a linguistically available meaning for a body corporate; the statutory context had to determine whether that meaning was appropriate.
The Tribunal regarded section 201(1)(d) as a fallback enforcement mechanism. The trustees are primarily responsible for the periodic charge. A settlor’s liability arises only where the tax remains unpaid after it should have been paid and the trustees are non-UK resident—precisely the circumstances in which collection from the trustees may be difficult.
Against that purpose, it would be surprising if HMRC’s recovery route disappeared solely because the person that funded the settlement was a company rather than an individual. The statutory definition of settlor referred to any person, and the surrounding liability provisions did not confine the relevant person to an individual.
The Upper Tribunal therefore held that the company’s “life” meant the period during which it remained in existence. Lexgreen was within section 201(1)(d), and its appeal was dismissed.
The Finance Act 2025 inserted express wording providing that references to a corporate settlor being alive or dying are to be read as references to the body being in existence or ceasing to exist. Lexgreen argued that the amendment showed the earlier law did not cover companies.
The Tribunal did not accept that inference. The explanatory material described the amendment, insofar as it affected section 201(1)(d), as clarifying the existing law. The judges treated that description consistently with their own interpretation rather than as evidence that Parliament was creating a new liability from scratch.
For advisers reviewing historic periods, that conclusion is significant. The decision does not confine corporate-settlor exposure to charges arising only after the express amendment.
· It is a secondary liability. The settlor is not automatically the first person HMRC should pursue merely because a periodic charge arises.
· The tax must remain unpaid after it ought to have been paid.
· The section 201(1)(d) route is directed at cases involving non-UK resident trustees.
· The company must fall within the statutory definition of settlor, commonly because it established or funded the settlement.
· The wider statutory limitations on liability and recovery must still be considered on the particular facts.
The case therefore should not be paraphrased as saying that every company connected with a trust is liable for the trust’s inheritance tax. Its importance lies in confirming that corporate status does not provide a categorical escape from the settlor-liability rules.
Companies that have funded employee trusts, family trusts, remuneration arrangements or offshore investment structures should maintain a clear register of those settlements and their tax anniversaries. Historic structures are often poorly documented after advisers, directors or trustees change. That administrative drift can become expensive when a periodic charge is missed.
Responsibility for returns and payment should be documented between the settlor, trustees and professional advisers. Non-resident trustees should hold sufficient liquidity for tax and confirm payment promptly. The corporate settlor should not assume that trustee indemnities or the trust’s separate legal administration remove its own potential statutory exposure.
A review should also identify whether the company remains in existence, whether it provided funds directly or indirectly, and whether any contractual right of reimbursement or indemnity is available if HMRC seeks recovery. Those questions require the trust deed, funding records and contemporaneous corporate documents—not merely the current trustees’ understanding.
Lexgreen turns on an unusual phrase, but the underlying principle is straightforward. The relevant-property regime creates charges on trusts independently of a fresh disposition by an individual. Section 201 then identifies the persons from whom the tax can be recovered when it is not paid.
In that context, the “life” of a corporate settlor can mean the duration of its existence. The decision closes off a literal argument that would otherwise have removed an important collection mechanism whenever an offshore trust happened to be funded by a company.
For private client and corporate advisers, the wider message is that historic trust funding can leave a liability trail. It should be mapped before—not after—a ten-year charge goes unpaid.
