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HMRC internal manual

Inheritance Tax Manual

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

‘Subsidiary’ has the meaning given by Companies Act 2006/S1159 & Sch 6, in other words its ordinary meaning, IHTA84/S13(5).

IHTA84/S13(1) envisages a disposition to a trust for the benefit of

  • persons employed by or holding office with the company, IHTA84/S13(1)(a) or
  • persons employed by of holding office with the company or any one or more of its subsidiaries, IHT84/S13(1)(b).

Where the disposition is to a trust that includes employees of the company and one or more subsidiaries, those eligible to benefit from the trust must include all or most of the employees and officers of the subsidiary and the employees and officers of the holding company taken as a single class. So it is possible to exclude all the officers and employees of the holding company without losing the exemption, if they are only a minority of the class. But the exemption is not available for a contribution to a fund for the sole benefit of the employees of a small subsidiary. This interpretation is contained in SP E11.