IHTM14851 - Transfers by close companies: introduction

Since in general, inheritance tax is chargeable on transfers made by individuals, there could be considerable scope for a person to avoid tax by effecting transfers through the medium of companies. Such transactions are less likely with the introduction of PETs and 100% business relief.

To limit such avoidance the provisions at IHTA84/S94 through to IHTA84/S102 lift the corporate veil and

• attribute to the participators in a close company a transfer of value made by the company and
• treat alterations in capital or rights as a disposition made by the participators.

Refer to SAV, who are responsible for all decisions in connection with the application of the legislation. They will determine what is a “close company” and who is a “participator”.

IHTA84/S102 (1) says that a close company is defined as within the meaning of the Corporation Tax Acts. In general terms, it is a UK registered company with 5 or less participants/directors.