Restrictions on the freedom to dispose of assets: general rule for ignoring a restriction
The general rule is that a restriction or fetter is to be ignored when you value a property on the first ‘relevant event’ (IHTM09773) unless either
- the contract was entered into before 27 March 1974 (IHTM09776) and the first relevant event was not a transfer on death, IHTA84/S163 (2), or
- consideration was given (IHTM09774), IHTA84/S163 (1)(a).
The word ‘contract’ covers rights of pre-emption, options, and rights of succession under partnership agreements or any agreements similar to a partnership but which are not partnerships in the strict sense.
When you consider a restriction or fetter it is the situation that existed on death or at the time of the other relevant event that is important. It is, for example, immaterial whether an option is subsequently exercised.
The granting of the option for no consideration (IHTM09775) may be a lifetime transfer and this can also have implications for valuing the property that is subject to the restriction.