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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Dispositions not intended to confer bounty: definitions

There are definitions of the terms used in IHTA84/S10. These are

  • ‘disposition’, which in addition to it’s general meaning (IHTM04023) specifically includes anything treated as a disposition by IHTA84/S3 (3) which applies when a person’s omission to exercise a right (IHTM14801) reduces the value of their estate, IHTA84/S10 (3),
  • ‘transaction’, includes a series of transactions and any associated operations. (IHTM14822) When it is claimed that a transaction is within IHTA84/S10, the S10 conditions must be satisfied not only for the individual transaction being considered but also for the whole series of transactions, IHTA84/S10 (3),
  • ‘connected persons’, whether a person is connected with another has to be decided by reference to TCGA92/S286, but as if in S286

    • ‘relative’ included uncle, aunt, nephew and niece, and
    • ’settlement’, (IHTM16000) ‘settlor’ (IHTM16000) and ‘trustee’ (IHTM16000) had the same meaning as in the IHTA, IHTA84/S270.

Subject to this, the detailed rules of TCGA92/S286 are set out at IHTM04442 (IHTM04442).

  • ‘arm’s length’, implies the absence of any relationship between the parties such as might lead to one being favoured by the other. In this context, relationship is used in its broadest sense and so may include close friendship as well as consanguinity.

In considering whether this requirement is satisfied, you should consider all available evidence. Factors to bear in mind include

* whether the parties were separately advised, and
* whether negotiations show a sequence of offer and counter offer.

If there is a history of dealings between two persons as a result of which one regularly had the better of the bargain, then there may be grounds for concluding that the parties were not genuinely at arm’s length.