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HMRC internal manual

Inheritance Tax Manual

Employee benefit trusts: dispositions by close companies: dispositions for the benefit of employees

A disposition is not a transfer of value when the terms of IHTA84/S13 are met (IHTM04200). A similar relief for a disposition to an Employee Ownership Trust (IHTM42995) is provided by IHTA84/S13A (IHTM42997)

Where the disposition has been allowable in computing that person’s profits or gains for the purposes of Income Tax or Corporation Tax and IHTA84/S13(1) is being considered, you should ask the taxpayer or agent for the Inspector’s reference. You should write to the Inspector asking them to confirm the position. If they confirm the contributions have been allowed then any apparent charge under IHTA84/S13 and IHTA84/S94 automatically falls.

However, this exclusion does not apply where (amongst other things):

  • the contributions by the close company are made to an employee benefit trust (EBT) that does not satisfy IHTA84/S86,
  • the participators (IHTM42955) in the company and any person connected with them are not excluded from benefit under the terms of the EBT so IHTA84/S13(2) applies.