Where a close company is entitled to an interest in possession
(IIP) (
IHTM16000) in settled property,
IHTA84/S101 (1) ‘looks through’ the company and treats
each participator as entitled to an appropriate share of the
company’s interest. The one exception to this is in
connection with a claim with the purchase of a reversion (
IHTM04272) under IHTA84/S55.
If the participator’s share of the company is held
beneficially, their estate (
IHTM04029) includes an appropriate
share of the settled property and so a transfer of value (
IHTM04023) will occur when they die. A
transfer of value would also be made by them in the event of a
reduction in his share of the company otherwise than for full
consideration.
If the participator’s share is held otherwise than in a
beneficial capacity (typically as trustee of a settlement) then
they are treated as entitled to the settled property only in that
capacity.
If they are trustee of a settlement with non-IIP trusts then
their share is treated as comprised in the settled funds to the
extent that no IIP subsists under that settlement.
The same applies to the extent that there is an IIP, but in
addition IHTA84/S101 (2) treats the life tenant etc as beneficially
entitled to the trustee’s share of the company’s
interest. As a result a transfer of value will occur when the life
tenant dies and one would also be made by him in the event of a
reduction in the trustee’s share of the company otherwise
than for full consideration.
It follows that where a person who had an IIP in settled
property assigns the interest to a close company wholly owned by
him, there is in effect no change in the beneficial ownership and
no claim arises - see IHTA84/S53 (2) and IHTA84/S101 (1).
