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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Settled property: transfer by a close company apportioned to trustees

Where a close company makes a transfer of value, (IHTM04024) each participator is treated as making a transfer of the amount apportioned to them. (IHTM04068) Where the participator is a trustee of a settlement and an interest in possession (IIP) (IHTM16000) subsists in the settled property, IHTA84/S99 (2)(a) applies. This typically occurs where settled property includes shares in such a company. In this situation, the IIP is treated as coming to an end and the value transferred is equivalent to the amount apportioned to the trustee.

If there is more than one IIP (or if no IIP subsists in part of the property, IHTA84/S99 (2)(b)) the value transferred so far as each beneficiary is concerned is

  • such portion of the amount apportioned to the trustee
  • as corresponds to the share of the settled property in which the beneficiary’s IIP subsists.In ascertaining the value(s) transferred, however, the amount apportioned to the trustee is reduced by the extent that the value of the settled property was increased by the company’s transfer of value, IHTA84/S99 (3). (For the purpose of ascertaining whether and, if so, to what extent the settled property increased in value, any change in the value of the shares etc in the company is ignored.)