IHTM25171 - Unquoted securities - control holding: Securities within S105(1)(b)

IHTA84/S105 (1)(b) applies with effect from 6 April 1996 to securities which:

• either by themselves or together with other securities owned by the transferor and/or any unquoted shares so owned
• give the transferor control of the company immediately before the transfer.

There were different rules for deaths and transfers before 10 March 1992. IHTA84/S105 (1)(b) applied to control holdings of quoted as well as unquoted shares and securities. From 10 March 1992 control holdings of quoted shares and securities ( IHTM25201) were transferred to IHTA84/S105 (1)(cc). And from 6 April 1996 unquoted shares, whether or not they gave control, were transferred to IHTA84/S105 (1)(bb). So this provision now applies only to securities.

The rate of relief has been 100% since 10 March 1992.

For the purposes of IHTA84/S105 (1)(b) (as effective from 10 March 1992), "unquoted" means not quoted on a recognised stock exchange. And with effect from 6 April 1996 “unquoted” was replaced by “unlisted”. So IHTA84/S105 (1)(b) can apply to shares and securities dealt in on the Unlisted Securities Market and on its successor the Alternative Investment Market ( IHTM18336).

There is a separate summary of the meaning of unquoted ( IHTM25192) for business relief purposes.

Note that for the purposes of IHTA84/S105 (1)(b)

• “control” is defined by IHTA84/S269 (this was discussed in the Walding case ( IHTM25225))
• accordingly shares or securities which are related property within IHTA84/S161 are taken into account
• also take into account any shares or securities included in an unadministered residuary estate ( IHTM22025) to the extent to which the transferor was a beneficiary
• the estate concept applies
• only securities which contribute to the transferor's control count; accordingly non-voting securities can never come within IHTA84/S105 (1)(b) even when owned by the person who controls the company
• it is not essential that control is derived from shares in the same company (example below)
• to come within IHTA84/S105 (1)(b) the transfer does not need to cause the transferor to lose control; it is sufficient that the shares transferred formed part of a control holding
• the transferor must have had control ( IHTM25172) immediately before the transfer.

Example

A has 49 out of 100 voting shares in X Ltd. A also has control of another company, Y Ltd, which owns a further 40 voting shares in X Ltd. A has control of X Ltd within the meaning of IHTA84/S105 (1)(b).