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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Liability in special cases: transfers by a close company

The persons liable for any tax which is payable in consequence of a transfer of value made by a close company (IHTM04068) are specified by IHTA84/S202 (1) which places a primary liability on the company and a secondary liability, subject to limitations, on other persons. This subsection also applies to a claim arising by virtue of IHTA84/S99 (2) when the participator is a trustee of a settlement.

The company making the transfer of value is primarily liable to pay the tax. However, if the tax remains unpaid after it ought to have been paid the other persons liable are

  • the persons to whom any part of the transfer has been apportioned, except that a person to whom 5% or less of the value transferred is apportioned will not be liable for any of the tax. The liability in this case remains with the company. As regards the other persons, each is liable for that proportion of the tax corresponding to that part of the value of the transfer apportioned to them, and
  • any individual whose estate is increased by the company’s transfer, but such person is not liable for an amount greater than the amount of the increase.The liability of any other persons is excluded by IHTA84/S202 (4).

The liability for tax on a charge arising under IHTA84/S98 (1) (alterations of capital etc) is governed by the general terms of IHTA84/S199. The participators are deemed to have made the transfer and they are liable under IHTA84/S199 (1)(a).

The question of liability will be decided by SAV.