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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Government securities in foreign ownership: close company with an interest in possession

When dealing with exempt securities comprised in a settlement (IHTM16000) under which a close company has an interest in possession (IHTM04092) in the securities, you should first confirm that the company is a close company. If it is(a big ‘if’ as such cases are rare) then the conditions concerning domicile (IHTM04296) and ordinary residence (IHTM04295) have to be satisfied by the participators in the company and not by the company itself.You should refer any case of doubt or difficulty to TG, especially if the participators are (or include) the trustees of another settlement.


A Ltd (a foreign company) is entitled to an interest in possession under a settlement. All the (100) issued shares in the company are owned as to 40 each by Mr and Mrs A and 20 bytheir son B.

The company is a close company. 80 % of the company’s interest is attributed to Mr and Mrs A equally and 20 % to B. Any exempt securities held in the settlement will be excluded (or taxed) according to their domicile and ordinary residence status and not by reference to that of A Ltd.