Interest in possession (IIP) is a trust law principle that has UK taxation implications.
A beneficiary (www.practicallaw.com/9-382-5565) of a trust (www.practicallaw.com/4-107-7416) has an IIP if they have the immediate right to receive the income arising from the trust property, or have the use and enjoyment of it.
Before 22 March 2006, all IIP trusts are treated for inheritance tax (www.practicallaw.com/3-382-5648) (IHT) purposes as though are were owned by the beneficiary with the IIP.
An IIP trust created on or after 22 March 2006 is only treated in this way if it is one of the following:
In all other cases, the IIP trust is taxed under the relevant property regime (www.practicallaw.com/resource.do?item=:45291706).
An IIP trust is also known as a life interest trust (www.practicallaw.com/8-107-6759) and the principal (income) beneficiary also known as the life tenant (www.practicallaw.com/resource.do?item=:42380768).