Transfers and other events on or after 17 March 1987: the conditions
Where the transferor dies on or after 17 March 1987, the availability of instalments for tax on a potentially exempt transfer (PET) (IHTM04057) is governed by IHTA84/S227 and IHTA84/S228, as amended by IHTA84/S58 and FA87/S8. The general rule the amended sections contain is that instalments are not available unless both the following conditions are satisfied:
- the tax attributable to the qualifying property is borne by the person benefiting from the transfer, and
- the property was owned by the transferee (IHTM30244) throughout the period beginning with the date of the chargeable transfer and ending with the death of the transferor (or, if earlier, the death of the transferee), or
- for the purpose of determining the tax the value of the property is reduced by Business Relief (IHTM25131) and Agricultural Relief (IHTM24000) under the replacement property provisions in IHTA84/S113B or IHTA84/S124B.
Notwithstanding the requirement detailed in the second bullet point instalments will still be available if the provisions of IHTA84/S113 A (6) are met.
Andrew gives Brian a controlling interest in X Ltd, a quoted company. Brian retains the shares until Andrew’s death.
The condition in IHTA84/S227 (1C) (a) is satisfied. Instalments are available.
Andrew gives Brian a farm. The conditions for Agricultural Relief (AR) are satisfied at the time of the gift. Brian sells the farm and within a year reinvests all the proceeds in another farm. Andrew then dies in 1991 and tax becomes payable. The replacement property rules for AR in S124B are satisfied. The instalment facility is available since on Andrew’s death the value transferred is reduced by AR in calculating the tax payable.
There is a further condition where the property transferred consists of unquoted shares or unquoted securities (IHTM30242).