The meaning of ‘interest in possession’ in the capital transfer tax context came before the House of Lords in Pearson v IR Commrs [1981] AC 753.

The facts were as follows:

Under a 1964 settlement, the trust fund was to be held on trust absolutely in equal shares for such of the settlor’s children as had attained the age of 21 years, subject to:

(1)the trustees’ overriding power of appointment of both income and capital; and

(2)the trustees’ power to accumulate income during the period of 21 years from the date of the settlement.

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