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Inheritance Tax Act 1984

Type Public General Act

Publication 1984-07-31

Last updated 2025-04-06

State In force

Department Statute Law Database

Source legislation.gov.uk

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(b) where the tax payable is paid out of settled property to which this section applies immediately after the event, the amount which, after deducting the tax, is equal to the amount on which tax would be charged by virtue of paragraph (a) above.

(6) The rate at which tax is charged under this section shall be the aggregate of the following percentages—

(a) 0.25 per cent. for each of the first forty complete successive quarters in the relevant period,

(b) 0.20 per cent. for each of the next forty,

(d) 0.10 per cent. for each of the next forty, and

(e) 0.05 per cent. for each of the next forty.

(7) Where the whole or part of the amount on which tax is charged under this section is attributable to property which was excluded property at any time during the relevant period then, in determining the rate at which tax is charged under this section in respect of that amount or part, no quarter throughout which that property was excluded property shall be counted.

(8) In subsections (6) and (7) above “the relevant period” means the period beginning with the later of—

(a) the day on which the property in respect of which tax is chargeable became (or last became) property to which this section applies, and

(b) 13th March 1975,

and ending with the day before the event giving rise to the charge.

(9) Where the property in respect of which tax is chargeable—

(a) was relevant property immediately before 10th December 1981, and

(b) became (or last became) property to which this section applies on or after that day and before 9th March 1982 (or, where paragraph 6, 7 or 8 of Schedule 15 to the Finance Act 1982 applied, 1st April 1983 or, as the case may be, 1st April 1984),

subsection (8) above shall have effect as if the day referred to in paragraph (a) of that subsection were the day on which the property became (or last became) relevant property before 10th December 1981.

(10) For the purposes of this section trustees shall be treated as making a disposition if they omit to exercise a right (unless it is shown that the omission was not deliberate) and the disposition shall be treated as made at the time or latest time when they could have exercised the right.

Accumulation and maintenance trusts

71

(1) Subject to subsections (1A) to(2) below, this section applies to settled property if—

(a) one or more persons (in this section referred to as beneficiaries) will, on or before attaining a specified age not exceeding eighteen , become beneficially entitled to it . . . , and

(b) no interest in possession subsists in it and the income from it is to be accumulated so far as not applied for the maintenance, education or benefit of a beneficiary.

(1A) This section does not apply to settled property at any particular time on or after 22nd March 2006 unless this section—

(a) applied to the settled property immediately before 22nd March 2006, and

(b) has applied to the settled property at all subsequent times up to the particular time.

(1B) This section does not apply to settled property at any particular time on or after 22nd March 2006 if, at that time, section 71A below applies to the settled property.

(2) This section does not apply to settled property unless either—

(a) not more than twenty-five years have elapsed since the commencement of the settlement or, if it was later, since the time (or latest time) when the conditions stated in paragraphs (a) and (b) of subsection (1) above became satisfied with respect to the property, or

(b) all the persons who are or have been beneficiaries are or were either—

(i) grandchildren of a common grandparent, or

(ii) children, widows or widowers or surviving civil partners of such grandchildren who were themselves beneficiaries but died before the time when, had they survived, they would have become entitled as mentioned in subsection (1)(a) above.

(3) Subject to subsections (4) and (5) below, there shall be a charge to tax under this section—

(a) where settled property ceases to be property to which this section applies, and

(b) in a case in which paragraph (a) above does not apply, where the trustees make a disposition as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(4) Tax shall not be charged under this section—

(a) on a beneficiary’s becoming beneficially entitled to, or to an interest in possession in, settled property on or before attaining the specified age, or

(b) on the death of a beneficiary before attaining the specified age.

(5) Subsections (3) to (8) and (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section (with the substitution of a reference to subsection (3)(b) above for the reference in section 70(4) to section 70(2)(b)).

(6) Where the conditions stated in paragraphs (a) and (b) of subsection (1) above were satisfied on 15th April 1976 with respect to property comprised in a settlement which commenced before that day, subsection (2)(a) above shall have effect with the substitution of a reference to that day for the reference to the commencement of the settlement, and the condition stated in subsection (2)(b) above shall be treated as satisfied if—

(a) it is satisfied in respect of the period beginning with 15th April 1976, or

(b) it is satisfied in respect of the period beginning with 1st April 1977 and either there was no beneficiary living on 15th April 1976 or the beneficiaries on 1st April 1977 included a living beneficiary, or

(c) there is no power under the terms of the settlement whereby it could have become satisfied in respect of the period beginning with 1st April 1977, and the trusts of the settlement have not been varied at any time after 15th April 1976.

(7) In subsection (1) above “persons” includes unborn persons; but the conditions stated in that subsection shall be treated as not satisfied unless there is or has been a living beneficiary.

(8) For the purposes of this section a person’s children shall be taken to include his illegitimate children, his adopted children and his stepchildren.

Property leaving employee trusts and newspaper trusts

72

(1) This section applies to settled property to which section 86 below applies if—

(a) no interest in possession subsists in it to which an individual is beneficially entitled, and

(b) no company-purchased interest in possession subsists in it.

(1A) For the purposes of subsection (1)(b) above, an interest in possession is “company-purchased” if—

(a) a company is beneficially entitled to the interest in possession,

(b) the business of the company consists wholly or mainly in the acquisition of interests in settled property, and

(c) the company has acquired the interest in possession for full consideration in money or money's worth from an individual who was beneficially entitled to it.

(1B) Section 59(3) and (4) above apply for the purposes of subsection (1A)(c) above as for those of section 59(2)(b) above, but as if the references to the condition set out in section 59(2)(a) above were to the condition set out in subsection (1A)(b) above.

(2) Subject to subsections (3A), (4) , (4A) and (5) below, there shall be a charge to tax under this section—

(a) where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property, and

(b) where a payment is made out of settled property to which this section applies for the benefit of a person within subsection (3) below, or a person connected with such a person, and

(c) in a case which paragraphs (a) and (b) above do not apply, where the trustees make a disposition (otherwise than by way of a payment out of the settled property) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3) A person is within this subsection if—

(a) he has directly or indirectly provided any of the settled property otherwise than by additions not exceeding in value £1,000 in any one year; or

(b) in a case where the employment in question is employment by a close company, he is a participator in relation to that company and either—

(i) is beneficially entitled to, or to rights entitling him to acquire, not less than 5 per cent. of, or of any class of the shares comprised in, its issued share capital, or

(ii) would, on a winding-up of the company, be entitled to not less than 5 per cent. of its assets; or

(3A) Where settled property ceases to be property to which this section applies because paragraph (d) of section 86(3) no longer applies, tax is not chargeable under this section by virtue of subsection (2)(a) if the only reason that paragraph no longer applies is that one or both of the trading requirement and the controlling interest requirement mentioned in that paragraph are no longer met with respect to the company so mentioned.

(4) If the trusts are those of a profit sharing scheme approved in accordance with Schedule 9 to the Taxes Act 1988, tax shall not be chargeable under this section by virtue of subsection (3)(b) above on an appropriation of shares in pursuance of the scheme.

(4A) If the trusts are those of a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003, tax shall not be chargeable under this section by virtue of subsection (3)(b) above on an appropriation of shares to, or acquisition of shares on behalf of, an individual under the plan.

(5) Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section (with the substitution of a reference to subsection (2)(c) above for the reference in section 70(4) to section 70(2)(b)).

(6) In this section—

(a) “close company” and “participator” have the same meanings as in Part IV of this Act; and

(b) “year” means the period beginning with 26th March 1974 and ending with 5th April 1974, and any subsequent period of twelve months ending with 5th April;

and a person shall be treated for the purposes of this section as acquiring an interest for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that interest or of other property.

Pre-1978 protective trusts

73

(1) This section applies to settled property which is held on trusts to the like effect as those specified in section 33(1)(ii) of the Trustee Act 1925 and which became held on those trusts on the failure or determination before 12th April 1978 of trusts to the like effect as those specified in section 33(1)(i).

(2) Subject to subsection (3) below, there shall be a charge to tax under this section—

(a) where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property for the benefit of the principal beneficiary within the meaning of section 33 of the Trustee Act 1925, and

(b) in a case which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by way of such a payment) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3) Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section.

Pre-1981 trusts for disabled persons

74

(1) This section applies to settled property transferred into settlement before 10th March 1981 and held on trusts under which, during the life of a disabled person, no interest in possession in the settled property subsists, and which secure that any of the settled property which is applied during his life is applied only or mainly for his benefit.

(2) Subject to subsection (3) below, there shall be a charge to tax under this section—

(a) where settled property ceases to be property to which this section applies, otherwise than by virtue of a payment out of the settled property for the benefit of the person mentioned in subsection (1) above, and

(b) in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by way of such a payment) as a result of which the value of settled property to which this section applies is less than it would be but for the disposition.

(3) Subsections (3) to (10) of section 70 above shall apply for the purposes of this section as they apply for the purposes of that section.

(4) In this section “disabled person” means a person who—

(a) is by reason of mental disorder (within the meaning of the Mental Health Act 1983) incapable of administering his property or managing his affairs, or

(b) is in receipt of an attendance allowance under section 64 of the Social Security Contributions and Benefits Act 1992 or section 64 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 , or

(c) is in receipt of a disability living allowance under section 71 of the Social Security Contributions and Benefits Act 1992 or section 71 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 by virtue of entitlement to the care component at the highest or middle rate , or

(d) is in receipt of pension age disability payment which is a category of disability assistance specifically for older people given in accordance with regulations made under section 31 of the Social Security (Scotland) Act 2018 , or

(e) is in receipt of Scottish adult disability living allowance, which is a category of disability assistance specifically for adults which takes the form of a living allowance given in accordance with regulations made under section 31 of the Social Security (Scotland) Act 2018 by virtue of entitlement to the care component at the highest or middle rate.

Special cases—reliefs

Property becoming subject to employee trusts

75

(1) Tax shall not be charged under section 65 above in respect of shares in or securities of a company which cease to be relevant property on becoming held on trusts of the description specified in section 86(1) below if the conditions in subsection (2) below are satisfied.

(2) The conditions referred to in subsection (1) above are—

(a) that the persons for whose benefit the trusts permit the settled property to be applied include all or most of the persons employed by or holding office with the company;

(b) that, at the date when the shares or securities cease to be relevant property or at a subsequent date not more than one year thereafter, both the conditions mentioned in subsection (2) of section 28 above (read with subsections (3) and (7)) are satisfied, without taking account of shares or securities held on other trusts; and

(c) that the trusts do not permit any of the property to be applied at any time (whether during any such period as is referred to in section 86(1) below or later) for the benefit of any of the persons mentioned in subsection (4) of section 28 above (read with subsections (5) to (7)) or for the benefit of the settlor or of any person connected with him ; and

(d) the shares in or securities of the company have been comprised in the settlement mentioned in section 65(1) throughout the period of two years ending with the date on which they cease to be relevant property.

(3) In its application for the purposes of subsection (2)(c) above, section 28(4) and (6A) shall be construed as if—

(a) references to section 28(1) were references to subsection (2) above, and

(b) references to the time of the transfer of value were references to the time when the property ceases to be relevant property.

(4) A reference in subsection (2)(d) to shares in or securities of a company includes, in a case in which a reorganisation of share capital has occurred, the original shares to which the new holding relates.

(5) In subsection (4)—

(a) “reorganisation of share capital” means a transaction to which section 127 of the 1992 Act (equation of original shares and new holding) applies or would apply but for section 134 of that Act;

(b) “the original shares” and “the new holding” have the meaning given by section 126(1) of the 1992 Act.

Property becoming held for charitable purposes, etc.

76

(1) Tax shall not be charged under this Chapter (apart from section 79 below) in respect of property which ceases to be relevant property, or ceases to be property to which section 70, 71, 71A, 71D, 72, 73 or 74 above or paragraph 8 of Schedule 4 to this Act applies, on becoming—

(a) property held for charitable purposes only without limit of time (defined by a date or otherwise);

(b) the property of a political party qualifying for exemption under section 24 above; or

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) If the amount on which tax would be charged apart from this section in respect of any property exceeds the value of the property immediately after it becomes property of a description specified in paragraphs (a) to (c) of subsection (1) above (less the amount of any consideration for its transfer received by the trustees), that subsection shall not apply but the amount on which tax is charged shall be equal to the excess.

(4) The reference in subsection (3) above to the amount on which tax would be charged is a reference to the amount on which it would be charged—

(a) assuming (if it is not in fact so) that the tax is not paid out of settled property, and

(b) apart from Chapters I and II of Part V of this Act;

and the reference in that subsection to the amount on which tax is charged is a reference to the amount on which it would be charged on that assumption and apart from those Chapters.

(5) Subsection (1) above shall not apply in relation to any property if the disposition by which it becomes property of the relevant description is defeasible; but for this purpose a disposition which has not been defeated at a time twelve months after the property concerned becomes property of the relevant description and is not defeasible after that time shall be treated as not being defeasible, whether or not it was capable of being defeated before that time.

(6) Subsection (1) above shall not apply in relation to any property if it or any part of it may become applicable for purposes other than charitable purposes or purposes of a body mentioned in subsection (1)(b), or (c) above.

(7) Subsection (1) shall not apply in relation to any property if, at or before the time when it becomes property of the relevant description, an interest under the settlement is or has been acquired for a consideration in money or money’s worth by an exempt body otherwise than from a charity or a body mentioned in subsection (1)(b) or (c) above.

(8) In subsection (7) above “exempt body” means a charity or a body mentioned in subsection (1)(b), or (c) above; and for the purposes of subsection (7) above a body shall be treated as acquiring an interest for a consideration in money or money’s worth if it becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to that body or to another person) of that interest or of other property.

Works of art, historic buildings, etc.

Maintenance funds for historic buildings, etc.

77

Schedule 4 to this Act shall have effect.

Conditionally exempt occasions

78

(1) A transfer of property or other event shall not constitute an occasion on which tax is chargeable under any provision of this Chapter other than section 64 if the property in respect of which the charge would have been made has been comprised in the settlement throughout the six years ending with the transfer or event, and—

(a) the property is, on a claim made for the purpose, designated by the Treasury under section 31 above, and

(b) the requisite undertaking described in that section is given with respect to the property by such person as the Treasury think appropriate in the circumstances of the case or (where the property is an area of land within subsection (1)(d) of that section) the requisite undertakings described in that section are given with respect to the property by such person or persons as the Treasury think appropriate in the circumstances of the case.

(1A) A claim under subsection (1) above must be made no more than two years after the date of the transfer or other event in question or within such longer period as the Board may allow.

(2) References in this Chapter to a conditionally exempt occasion are to—

(a) a transfer or event which by virtue of subsection (1) above does not constitute an occasion on which tax is chargeable under this Chapter;

(b) a transfer or event which, by virtue of section 81(1) of the Finance Act 1976, did not constitute an occasion on which tax was chargeable under Chapter II of Part IV of the Finance Act 1982;

(c) a conditionally exempt distribution within the meaning given by section 81(2) of the Finance Act 1976 as it had effect in relation to events before 9th March 1982.

(3) Where there has been a conditionally exempt occasion in respect of any property, sections 32, 32A, 33(1), 33(2ZA) to (7) and 35(2) above shall have effect (and tax shall accordingly be chargeable under section 32 or 32A) as if—

(a) references to a conditionally exempt transfer and to such a transfer of property included references respectively to a conditionally exempt occasion and to such an occasion in respect of property;

(b) references to a disposal otherwise than by sale included references to any occasion on which tax is chargeable under any provision of this Chapter other than section 64;

(c) references to an undertaking given under section 30 above included references to an undertaking given under this section;

and the references in section 33(5) above to the person who made a conditionally exempt transfer shall have effect in relation to a conditionally exempt occasion as references to the person who is the settlor of the settlement in respect of which the occasion occurred (or if there is more than one such person, whichever of them the Board may select).

(4) Where by virtue of subsection (3) above the relevant person for the purposes of section 33 above is the settlor of a settlement, the rate (or each of the rates) mentioned in section 33(1)(b)(i) or (ii)—

(a) shall, if the occasion occurred before the first ten-year anniversary to fall after the property became comprised in the settlement concerned, be 30 per cent. of what it would be apart from this subsection, and

(b) shall, if the occasion occurred after the first and before the second ten-year anniversary to fall after the property became so comprised, be 60 per cent. of what it would be apart from this subsection;

and the appropriate provision of section 7 for the purposes of section 33(1)(b)(ii) is, if the settlement was created on his death, subsection (1) and, if not, subsection (2).

(5) Where by virtue of subsection (3) above the relevant person for the purposes of section 33 above is the settlor of a settlement and that settlor died before 13th March 1975, section 33(1)(b) above shall have effect (subject to subsection (4) above) with the substitution for sub-paragraph (ii) of the following sub-paragraph:—

(ii) the rate or rates that would have applied to that amount (“the chargeable amount”) in accordance with the appropriate provision of section 7 above if the relevant person had died when the chargeable event occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been added to that value and had formed the highest part of it.

(6) Section 34 above shall not apply to a chargeable event in respect of property if the last conditionally exempt transfer of the property has been followed by a conditionally exempt occasion in respect of it.

Exemption from ten-yearly charge

79

(1) Where property is comprised in a settlement and there has been a conditionally exempt transfer of the property on or before the occasion on which it became comprised in the settlement, section 64 above shall not have effect in relation to the property on any ten-year anniversary falling before the first occurrence after the transfer of a chargeable event with respect to the property.

(2) Where property is comprised in a settlement and there has been, on or before the occasion on which it became comprised in the settlement, a disposal of the property in relation to which subsection (4) of section 258 of the 1992 Act (capital gains tax relief for works of art etc.) had effect, section 64 above shall not have effect in relation to the property on any ten-year anniversary falling before the first occurrence after the disposal of an event on the happening of which the property is treated as sold under subsection (5) of the said section 258.

(3) Where property is comprised in a settlement and there has been no such transfer or disposal of the property as is mentioned in subsection (1) or (2) above on or before the occasion on which it became comprised in the settlement, subsection (3A) below applies if —

(a) the property has, on a claim made for the purpose, been designated by the Treasury under section 31 above,

(aa) that claim is made during the period beginning with the date of a ten-year anniversary of the settlement (“the relevant ten-year anniversary”) and ending—

(i) two years after that date, or

(ii) on such later date as the Board may allow,

(b) the requisite undertaking described in section 31 is given with respect to the property by such person as the Treasury think appropriate in the circumstances of the case, or (where the property is an area of land within subsection (1)(d) of that section) the requisite undertakings described in that section are given with respect to the property by such person or persons as the Treasury think appropriate in the circumstances of the case, and

...

(3A) Tax is not chargeable under section 64 above in relation to the property by reference to the relevant ten-year anniversary concerned or any subsequent ten-year anniversaries; but on the first occurrence of an event which, if there had been a conditionally exempt transfer of the property immediately before that relevant ten-year anniversary, would be a chargeable event with respect to the property—

(a) there is a charge to tax under this subsection, and

(b) on any ten-year anniversary falling after that event, tax is chargeable under section 64 above in relation to the property.

(4) Tax shall not be charged under subsection (3A) above in respect of property if, after the occasion mentioned in subsection (3) above and before the occurrence mentioned in subsection (3A) , there has been a conditionally exempt occasion in respect of the property.

(5) The amount on which tax is charged under subsection (3A) above shall be an amount equal to the value of the property at the time of the event.

(5A) Where the event giving rise to a charge to tax under subsection (3A) above is a disposal on sale, and the sale—

(a) was not intended to confer any gratuitous benefit on any person, and

(b) was either a transaction at arm's length between persons not connected with each other or a transaction such as might be expected to be made at arm's length between persons not connected with each other,

the value of the property at the time of that event shall be taken for the purposes of subsection (5) above to be equal to the proceeds of the sale.

(6) The rate at which tax is charged under subsection (3A) above shall be the aggregate of the following percentages—

(a) 0·25 per cent. for each of the first forty complete successive quarters in the relevant period,

(b) 0·20 per cent. for each of the next forty,

(d) 0·10 per cent. for each of the next forty, and

(e) 0·5 per cent. for each of the next forty.

(7) In subsection (6) above “the relevant period” means the period given by subsection (7A) below or, if shorter, the period given by subsection (7B) below.

(7A) The period given by this subsection is the period beginning with the latest of—

(a) the day on which the settlement commenced,

(b) the date of the last ten-year anniversary of the settlement to fall before the day on which the property became comprised in the settlement,

(d) 13th March 1975,

and ending with the day before the event giving rise to the charge.

(7B) The period given by this subsection is the period equal in length to the number of relevant-property days in the period—

(a) beginning with the day that is the latest of those referred to in paragraphs (a) to (d) of subsection (7A) above, and

(b) ending with the day before the event giving rise to the charge.

(7C) For the purposes of subsection (7B) above, a day is a “relevant-property day” if at any time on that day the property was relevant property.

(8) Subsection (9) below shall have effect where—

(a) by virtue of subsection (3A) above, section 64 does not have effect in relation to property by reference to the relevant ten-year anniversary of the settlement ,

(b) on that anniversary a charge to tax falls to be made in respect of the settlement under section 64, and

(9A) Subsection (9B) below applies where the same event gives rise—

(a) to a charge under subsection (3A) above in relation to any property, and

(b) to a charge under section 32 or 32A above in relation to that property.

(9B) If the amount of each of the charges is the same, each charge shall have effect as a charge for one half of the amount that would be charged apart from this subsection; otherwise, whichever of the charges is lower in amount shall have effect as if it were a charge the amount of which is nil.

(9) In calculating the rate at which tax is charged under section 64 above, the value of the consideration given for the property on its becoming comprised in the settlement shall be treated for the purposes of section 66(5)(b) above as if it were an amount on which a charge to tax was imposed in respect of the settlement under section 65 above at the time of the property becoming so comprised.

(10) In subsection (1) above, the reference to a conditionally exempt transfer of any property includes a reference to a transfer of value in relation to which the value of any property has been left out of account under the provisions of sections 31 to 34 of the Finance Act 1975 and, in relation to such property, the reference to a chargeable event includes a reference to an event on the occurrence of which tax becomes chargeable under Schedule 5 to this Act.

Miscellaneous

Initial interest of settlor or spouse

80

(1) Where a settlor or his spouse or civil partner is beneficially entitled to a qualifying interest in possession in property immediately after it becomes comprised in the settlement, the property shall for the purposes of this Chapter (including sections 48 and 48ZA (excluded property) as they apply for the purposes of this Chapter) be treated as not having become comprised in the settlement on that occasion; but when the property or any part of it becomes held on trusts under which neither of those persons is beneficially entitled to a qualifying interest in possession , the property or part shall for those purposes be treated as becoming comprised in a separate settlement made by that one of them who ceased (or last ceased) to be beneficially entitled to a qualifying interest in possession in it.

(2) References in subsection (1) above to the spouse or civil partner of a settlor include references to the widow or widower or surviving civil partner of a settlor.

(3) This section shall not apply if the occasion first referred to in subsection (1) above occurred before 27th March 1974.

(4) Where the occasion first referred to in subsection (1) above occurs on or after 22nd March 2006, this section applies—

(a) as though for “ a qualifying interest in possession ” in each place where that appears in subsection (1) above there were substituted a postponing interest, and

(b) as though, for the purposes of that subsection, each of the following were a “postponing interest”—

(i) an immediate post-death interest;

(ii) a disabled person's interest.

Property moving between settlements

81

(1) Where property which ceases to be comprised in one settlement becomes comprised in another then, unless in the meantime any person becomes beneficially entitled to the property (and not merely to an interest in possession in the property), it shall for the purposes of this Chapter (including sections 48 and 48ZA (excluded property) as they apply for the purposes of this Chapter) be treated as remaining comprised in the first settlement (but held on the trusts of the second).

(2) Subsection (1) above shall not apply where the property ceased to be comprised in the first settlement before 10th December 1981; but where property ceased to be comprised in one settlement before 10th December 1981 and after 26th March 1974 and, by the same disposition, became comprised in another settlement, it shall for the purposes of this Chapter be treated as remaining comprised in the first settlement.

(3) Subsection (1) above shall not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the other settlement before 10th December 1981.

Excluded property

82

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property becoming settled on a death

83

Property which becomes comprised in a settlement in pursuance of a will or intestacy shall for the purposes of this Chapter be taken to have become comprised in it on the death of the testator or intestate (whether it occurred before or after the passing of this Act).

Income applied for charitable purposes

84

For the purposes of this Chapter (except sections 78 and 79) where the trusts on which settled property is held require part of the income of the property to be applied for charitable purposes, a corresponding part of the settled property shall be regarded as held for charitable purposes.

Credit for annual charges under Finance Act 1975

85

Any tax charged under paragraph 12(2) of Schedule 5 to the Finance Act 1975 and not already allowed as a credit under paragraph 12(3) of that Schedule or under section 125 of the Finance Act 1982 or under this section shall be allowed as a credit against tax chargeable under this Chapter (apart from section 79) in respect of the settled property or part concerned.

CHAPTER IV — MISCELLANEOUS

Trusts for benefit of employees

86

(1) Where settled property is held on trusts which, either indefinitely or until the end of a period (whether defined by a date or in some other way) do not permit any of the settled property to be applied otherwise than for the benefit of—

(a) persons of a class defined by reference to employment in a particular trade or profession, or employment by, or office with, a body carrying on a trade, profession or undertaking, or

(b) persons of a class defined by reference to marriage to or civil partnership with, or relationship to, or dependence on, persons of a class defined as mentioned in paragraph (a) above,

then, subject to subsection (3) below, this section applies to that settled property or, as the case may be, applies to it during that period.

(2) Where settled property is held on trusts permitting the property to be applied for the benefit of persons within paragraph (a) or (b) of subsection (1) above, those trusts shall not be regarded as outside the description specified in that subsection by reason only that they also permit the settled property to be applied for charitable purposes.

(3) Where any class mentioned in subsection (1) above is defined by reference to employment by or office with a particular body, this section applies to the settled property only if—

(a) the class comprises all or most of the persons employed by or holding office with the body concerned, or

(b) the trusts on which the settled property is held are those of a profit sharing scheme approved in accordance with Schedule 9 to the Taxes Act 1988; or

(c) the trusts on which the settled property is held are those of a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003, or

(d) the settled property consists of or includes ordinary share capital of a company which meets the trading requirement and the trusts on which the settled property is held are those of a settlement which—

(i) meets the controlling interest requirement with respect to the company, and

(ii) meets the all-employee benefit requirement with respect to the company.

(3A) For the purpose of determining whether subsection (3)(d) is satisfied in relation to settled property which consists of or includes ordinary share capital of a company—

(a) section 236I of the 1992 Act applies to determine whether the company meets the trading requirement (with references to “C” being read as references to that company),

(b) sections 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether the settlement meets the all-employee benefit requirement and the controlling interest requirement (with references in those sections to “C” being read as references to that company), and

(4) Where this section applies to any settled property—

(a) the property shall be treated as comprised in one settlement, whether or not it would fall to be so treated apart from this section, and

(b) an interest in possession in any part of the settled property shall be disregarded for the purposes of this Act (except section 55) if that part is less than 5 per cent. of the whole.

(5) Where any property to which this section applies ceases to be comprised in a settlement and, either immediately or not more than one month later, the whole of it becomes comprised in another settlement, then, if this section again applies to it when it becomes comprised in the second settlement, it shall be treated for all the purposes of this Act as if it had remained comprised in the first settlement.

Newspaper trusts

87

(1) In relation to property comprised in a settlement to which this section applies, section 86 above shall have effect as if newspaper publishing companies were included among the persons within paragraphs (a) and (b) of subsection (1) of that section.

(2) This section applies to a settlement if shares in a newspaper publishing company or a newspaper holding company are the only or principal property comprised in the settlement.

(3) In this section—

“newspaper publishing company” means a company whose business consists wholly or mainly in the publication of newspapers in the United Kingdom;

“newspaper holding company” means a company which—has as its only or principal asset shares in a newspaper publishing company, andhas powers of voting on all or most questions affecting the publishing company as a whole which if exercised would yield a majority of the votes capable of being exercised on them;and for the purposes of this section shares shall be treated as the principal property comprised in a settlement or the principal asset of a company if the remaining property comprised in the settlement or the remaining assets of the company are such as may be reasonably required to enable the trustees or the company to secure the operation of the newspaper publishing company concerned.

Protective trusts

88

(1) This section applies to settled property (other than property to which section 73 above applies) which is held on trusts to the like effect as those specified in section 33(1) of the Trustee Act 1925; and in this section “the principal beneficiary” and “the trust period” have the same meanings as in that section.

(2) For the purposes of this Act—

(a) there shall be disregarded the failure or determination, before the end of the trust period, of trusts to the like effect as those specified in paragraph (i) of the said section 33(1), and

(b) the principal beneficiary shall be treated as beneficially entitled to an interest in possession in any property which is for the time being held on trusts to the like effect as those specified in paragraph (ii) of the said section 33(1).

(3) Where—

(a) settled property became held before 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925, and

(b) as a result of the failure or determination of those trusts on or after 22nd March 2006, the principal beneficiary is treated by subsection (2)(b) above as beneficially entitled to an interest in possession,

this Act shall apply in relation to that interest in possession as if the principal beneficiary became beneficially entitled to that interest in possession before 22nd March 2006.

(4) Subsection (5) below applies where—

(a) settled property becomes held on or after 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925,

(b) the interest of the principal beneficiary under those trusts is—

(i) an immediate post-death interest,

(ii) a disabled person's interest within section 89B(1)(c) or (d) below, or

(iii) a transitional serial interest, and

(c) as a result of the failure or determination of those trusts, the principal beneficiary is treated by subsection (2)(b) above as beneficially entitled to an interest in possession.

(5) This Act shall apply—

(a) as if that interest in possession were a continuation of the immediate post-death interest, disabled person's interest or transitional serial interest, and

(b) as if the immediate post-death interest, or disabled person's interest or transitional serial interest, had not come to an end on the failure or determination of the trusts.

(6) Subsection (2) above does not apply in a case where—

(a) settled property becomes held on or after 22nd March 2006 on trusts to the like effect as those specified in section 33(1)(i) of the Trustee Act 1925, and

(b) the interest of the principal beneficiary under those trusts is—

(i) not an immediate post-death interest,

(ii) not a disabled person's interest within section 89B(1)(c) or (d) below, and

(iii) not a transitional serial interest.

Trusts for disabled persons

89

(1) This section applies to settled property transferred into settlement after 9th March 1981 and held on trusts—

(a) under which, during the life of a disabled person, no interest in possession in the settled property subsists, and

(b) which secure that, if any of the settled property or income arising from it is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person.

(2) For the purposes of this Act the person mentioned in subsection (1) above shall be treated as beneficially entitled to an interest in possession in the settled property.

(3) The trusts on which the settled property is held are not to be treated as falling outside subsection (1) by reason only of—

(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,

(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).

(3A) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(3B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(3C) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (3)(a) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (3A).

(3D) An order under subsection (3C) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(3E) A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(4) The reference in subsection (1) above to a disabled person is, in relation to any settled property, a reference to a person who, when the property was transferred into settlement, was a disabled person.

(4A) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.

Trustees' annuities, etc.

90

Where under the terms of a settlement a person is entitled by way of remuneration for his services as trustee to an interest in possession in property comprised in the settlement, then, except to the extent that the interest represents more than a reasonable amount of remuneration,—

(a) the interest shall be left out of account in determining for the purposes of this Act the value of his estate immediately before his death, and

(b) tax shall not be charged under section 52 above when the interest comes to an end.

Administration period

91

(1) Where a person would have been entitled to an interest in possession in the whole or part of the residue of the estate of a deceased person had the administration of that estate been completed, the same consequences shall follow under this Act as if he had become entitled to an interest in possession in the unadministered estate and in the property (if any) representing ascertained residue, or in a corresponding part of it, on the date as from which the whole or part of the income of the residue would have been attributable to his interest had the residue been ascertained immediately after the death of the deceased person.

(2) In this section—

(a) “unadministered estate” means all the property for the time being held by personal representatives as such, excluding property devolving on them otherwise than as assets for the payment of debts and excluding property that is the subject of a specific disposition, and making due allowance for outstanding charges on residue and for any adjustments between capital and income remaining to be made in due course of administration;

(b) “ascertained residue” means property which, having ceased to be held by the personal representatives as such, is held as part of the residue;

(c) subject to subsection (3) below, “charges on residue” means, in relation to the estate of a deceased person, the following liabilities properly payable out of the estate and interest payable in respect of those liabilities—

(i) funeral, testamentary and administration expenses and debts,

(ii) general legacies, demonstrative legacies, annuities and any sum payable out of the residue of the estate to which a person is entitled under the law of intestacy of any part of the United Kingdom or any other country, and

(iii) any other liabilities of the deceased person's personal representatives as such,

(d) “specific disposition” has the meaning given in section 947(6) of the Corporation Tax Act 2009, and

(e) the reference to the completion of the administration of the estate shall be construed as if it were in Chapter 3 of Part 10 of that Act.

(3) If, as between—

(a) persons interested under a specific disposition or in a general or demonstrative legacy or in an annuity, and

(b) persons interested in the residue of an estate,

any such liabilities as are mentioned in paragraph (c) of subsection (2) above fall exclusively or primarily on the property that is the subject of the specific disposition or on the legacy or annuity, only such part (if any) of those liabilities as falls ultimately on the residue shall be treated as charges on residue.

(4) In the application of this section to Scotland, “charges on residue” shall include, in addition to the liabilities specified in subsection (2)(c), any sums required to meet—

(a) claims in respect of prior rights or legal rights by a surviving spouse or civil partner, or

(b) claims in respect of legal rights by children.

Survivorship clauses

92

(1) Where under the terms of a will or otherwise property is held for any person on condition that he survives another for a specified period of not more than six months, this Act shall apply as if the dispositions taking effect at the end of the period or, if he does not survive until then, on his death (including any such disposition which has effect by operation of law or is a separate disposition of the income from the property) had had effect from the beginning of the period.

(2) Subsection (1) above does not affect the application of this Act in relation to any distribution or application of property occurring before the dispositions there mentioned take effect.

Disclaimers

93

Where a person becomes entitled to an interest in settled property but disclaims the interest, then, if the disclaimer is not made for a consideration in money or money’s worth, this Act shall apply as if he had not become entitled to the interest.

PART IV — CLOSE COMPANIES

Transfers by close companies

Charge on participators

94

(1) Subject to the following provisions of this Part of this Act, where a close company makes a transfer of value, tax shall be charged as if each individual to whom an amount is apportioned under this section had made a transfer of value of such amount as after deduction of tax (if any) would be equal to the amount so apportioned, less the amount (if any) by which the value of his estate is more than it would be but for the company’s transfer; but for this purpose his estate shall be treated as not including any rights or interests in the company.

(2) For the purposes of subsection (1) above the value transferred by the company’s transfer of value shall be apportioned among the participators according to their respective rights and interests in the company immediately before the transfer, and any amount so apportioned to a close company shall be further apportioned among its participators, and so on; but—

(a) so much of that value as is attributable to any payment or transfer of assets to any person which falls to be taken into account in computing that person’s profits or gains or losses for the purposes of income tax or corporation tax (or would fall to be so taken into account but for section 1285 of the Corporation Tax Act 2009 (exemption for UK company distributions)) shall not be apportioned, and

(b) if any amount which would otherwise be apportioned to an individual who is not a long-term UK resident is attributable to the value of any property outside the United Kingdom, that amount shall not be apportioned.

(3) In determining for the purposes of this section whether a disposition made by a close company is a transfer of value or what value is transferred by such a transfer no account shall be taken of the surrender by the company, in pursuance of section 240 or 402 of the Taxes Act 1988, of any relief or of the benefit of any amount of advance corporation tax paid by it.

(4) Where the amount apportioned to a person under this section is 5 per cent. or less of the value transferred by the company’s transfer of value then, notwithstanding section 3(4) above, tax chargeable under subsection (1) above shall be left out of account in determining, with respect to any time after the company’s transfer, what previous transfers of value he has made.

(5) References in section 19 above to transfers of value made by a transferor and to the values transferred by them (calculated as there mentioned) shall be treated as including references to apportionments made to a person under this section and to the amounts for the tax on which (if charged) he would be liable.

Participator in two companies

95

(1) Where—

(a) the value of the estate of a company (“the transferee company”) is increased as the result of a transfer of value made by a close company (“the transferor company”), and

(b) an individual to whom part of the value transferred is apportioned under section 94 above has an interest in the transferee company (or in a company which is a participator of the transferee company or any of its participators, and so on),

subsection (2) below shall apply to the computation, for the purposes of section 94 above, of the amount to be offset, that is to say, the amount by which the value of his estate is more than it would be but for the transfer.

(2) Where this subsection applies—

(a) the increase in the value of the transferee company’s estate shall be taken to be such part of the value transferred as accounts for the increase, and

(b) the increase so computed shall be apportioned among the transferee company’s participators according to their respective rights and interests in the company immediately before the transfer (and, where necessary, further apportioned among their participators, and so on),

and the amount so apportioned to the individual shall be taken to be the amount to be offset.

Preference shares disregarded

96

Where part of a close company’s share capital consists of preference shares (within the meaning of section 1023(5) of the Corporation Tax Act 2010) and a transfer of value made by that or any other close company has only a small effect on the value of those shares, compared with its effect on the value of other parts of the company’s share capital, the preference shares shall be left out of account in determining the respective rights and interests of the participators for the purposes of sections 94 and 95 above.

Transfers within group, etc.

97

(1) Where a close company (“the transferor company”) is a member, but not the principal company, of a group and—

(a) there is—

(i) a disposal of an asset by the transferor company, which is a disposal to which section 171(1) of the 1992 Act applies, or

(ii) by virtue of an election under section 171A(2) of that Act, a deemed transfer by the transferor company to another member of the group,. . .

(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(aa) the disposal is also, or the election gives rise to, a transfer of value, and

(b) the transfer of value has only a small effect on the value of the minority participators’ rights and interests in that company compared with its effect on the value of the other participators’ rights and interests in the company,

the rights and interests of the minority participators shall be left out of account in determining the respective rights and interests of the transferor company’s participators for the purpose of apportioning the value transferred under section 94 above.

(2) For the purposes of subsection (1) above—

(a) Section 170 of the 1992 Act (groups of companies: definitions) applies as for the purposes of sections 171 to 181 of that Act, and

(b) a minority participator is a participator of the transferor company who is not, and is not a person connected with, a participator of the principal company of the group or of any of the principal company’s participators;

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alterations of capital, etc.

Effect of alterations of capital, etc.

98

(1) Where there is at any time—

(a) an alteration in so much of a close company’s share or loan capital as does not consist of quoted shares or quoted securities

(b) an alteration in any rights attaching to unquoted shares in or unquoted debentures of a close company,

the alteration shall be treated as having been made by a disposition made at that time by the participators, whether or not it would fall to be so treated apart from this section, and shall not be taken to have affected the value immediately before that time of the unquoted shares or unquoted debentures.

(2) In this section “alteration” includes extinguishment.

(3) The disposition referred to in subsection (1) above shall be taken to be one which is not a potentially exempt transfer

Settled property

Transfers where participators are trustees

99

(1) Subsection (1) of section 94 above shall not apply in relation to a person who is a participator in his capacity as trustee of a settlement, but—

(a) the reference in subsection (2) of that section to sub-section (1) shall have effect as including a reference to subsection (2) of this section, and

(b) in relation to tax chargeable by virtue of subsection (2) of this section, sections 94(4) and 95 above shall apply with the necessary modifications.

(2) Where any part of the value transferred by a close company’s transfer of value is apportioned to a trustee of a settlement under section 94 above, then—

(a) if a qualifying interest in possession subsists in the settled property, a part of that interest corresponding to such part of the property as is of a value equal to the part so apportioned less the amount specified in subsection (3) below shall be treated for the purposes of Chapter II of Part III of this Act as having come to an end on the making of the transfer, and

(b) if no qualifying interest in possession subsists in the settled property, Chapter III of Part III of this Act shall have effect as if on the making of the transfer the trustee had made a disposition as a result of which the value of the settled property had been reduced by an amount equal to the part so apportioned less the amount specified in subsection (3) below;

and where a qualifying interest in possession subsists in part only of the settled property paragraphs (a) and (b) above shall apply with the necessary adjustments of the values and amounts referred to there.

(3) The amount referred to in paragraphs (a) and (b) of subsection (2) above is the amount (if any) by which the value of the settled property is more than it would be apart from the company’s transfer, leaving out of account the value of any rights or interests in the company.

Alterations of capital, etc. where participators are trustees

100

(1) This section applies where, by virtue of section 98 above, an alteration in a close company’s share or loan capital or of any rights attaching to shares in or debentures of a close company is treated as a disposition made by the participators, and—

(a) a person is a participator in his capacity as trustee of a settlement, and

(b) the disposition would, if the trustee were beneficially entitled to the settled property, be a transfer of value made by him, and

(c) at the time of the alteration an individual is beneficially entitled to an interest in possession in the whole or part of so much of the settled property as consists of unquoted shares in or unquoted securities of the close company.

(1A) Where the interest in possession is one to which the individual became beneficially entitled on or after 22nd March 2006, this section applies only if the interest in possession is—

(a) an immediate post-death interest,

(b) a disabled person's interest, or

or falls within section 5(1B) above.

(2) Where this section applies, such part of the individual’s interest shall be treated for the purposes of Chapter II of Part III of this Act as having come to an end at the time of the alteration as corresponds to the relevant decrease of the value of the property in which the interest subsists, that is to say the decrease caused by the alteration.

Companies' interests in settled property

101

(1) Where a close company is entitled to an interest in possession in settled property the persons who are participators in relation to the company shall be treated for the purposes of this Act (except section 55) as being the persons entitled to that interest according to their respective rights and interests in the company.

(1A) Where the interest in possession mentioned in subsection (1) above is one to which the company became entitled on or after 22nd March 2006 (whether or not the company was a close company when it became entitled to the interest), subsection (1) above applies in relation to the interest only if it is—

(a) an immediate post-death interest, or

(b) a transitional serial interest,

or falls within section 5(1B) above.

(1B) Subsection (1C) below applies where any of the participators mentioned in subsection (1) above (“the prior participator”) disposes of rights and interests of his in the company to another person (“the later participator”).

(1C) If and so far as the later participator is a participator in the company by virtue of having any of the rights and interests disposed of, subsection (1) above is to be applied to him only as a participator in his own right (in particular, he is not to be treated by virtue of that subsection as having entitlement to the interest in possession as a result of disposal to him of entitlement that the prior participator was treated as having by virtue of that subsection, but this is without prejudice to the application of this Act in relation to the prior participator as the person making the disposal).

(2) Where—

(a) the participators mentioned in subsection (1) above include the trustees of a settlement, and

(b) a person is beneficially entitled to an interest in possession in the whole or part of the settled property by virtue of which the trustees are participators,

that person shall be treated for the said purposes as beneficially entitled to the whole or corresponding part of the interest to which the trustees would otherwise be treated as entitled under that subsection.

General

Interpretation

102

(1) In this Part of this Act—

“close company” means a company within the meaning of the Corporation Tax Acts which is (or would be if resident in the United Kingdom) a close company for the purposes of those Acts;

“participator”, in relation to any company, means any person who is (or would be if the company were resident in the United Kingdom) a participator in relation to that company within the meaning given by section 454 of the Corporation Tax Act 2010, other than a person who would be such a participator by reason only of being a loan creditor;

“qualifying interest in possession” has the meaning given by section 59 above.

(2) References in this Part of this Act to a person’s rights and interests in a company include references to rights and interests in the assets of the company available for distribution among the participators in the event of a winding up or in any other circumstances.

PART V — MISCELLANEOUS RELIEFS

CHAPTER I — BUSINESS PROPERTY

Preliminary

103

(1) In this Chapter references to a transfer of value include references to an occasion on which tax is chargeable under Chapter III of Part III of this Act (apart from section 79), and

(a) references to the value transferred by a transfer of value include references to the amount on which tax is then chargeable, and

(b) references to the transferor include references to the trustees of the settlement concerned.

(2) For the purposes of this Chapter a company and all its subsidiaries are members of a group, and “holding company” and “subsidiary” have the meaning given by section 1159 of and Schedule 6 to the Companies Act 2006

(3) In this Chapter “business” includes a business carried on in the exercise of a profession or vocation, but does not include a business carried on otherwise than for gain.

The relief

104

(1) Where the whole or part of the value transferred by a transfer of value is attributable to the value of any relevant business property, the whole or that part of the value transferred shall be treated as reduced—

(a) in the case of property falling within section 105(1)(a) or (b) or (bb) below by 100 per cent;

(b) in the case of other relevant business property, by 50 per cent;

but subject to the following provisions of this Chapter.

(2) For the purposes of this section, the value transferred by a transfer of value shall be calculated as a value on which no tax is chargeable.

Relevant business property

105

(1) Subject to the following provisions of this section and to sections 106, 108, . . . , 112(3) and 113 below, in this Chapter “relevant business property” means, in relation to any transfer of value,—

(a) property consisting of a business or interest in a business;

(b) . . . securities of a company which are unquoted and which (either by themselves or together with other such securities owned by the transferor and any unquoted shares so owned) gave the transferor control of the company immediately before the transfer;

(bb) any unquoted shares in a company;

(cc) shares in or securities of a company which are quoted and which (either by themselves or together with other such shares or securities owned by the transferor) gave the transferor control of the company immediately before the transfer;

(d) any land or building, machinery or plant which, immediately before the transfer, was used wholly or mainly for the purposes of a business carried on by a company of which the transferor then had control or by a partnership of which he then was a partner; and

(e) any land or building, machinery or plant which, immediately before the transfer, was used wholly or mainly for the purposes of a business carried on by the transferor and was settled property in which he was then beneficially entitled to an interest in possession.

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1ZA) In subsection (1) above “quoted”, in relation to any shares or securities, means listed on a recognised stock exchange and “unquoted”, in relation to any shares or securities, means not so listed.

(2) Shares in or securities of a company do not fall within subsection (1) . . . (cc) above if—

(a) they would not have been sufficient, without other property, to give the transferor control of the company immediately before the transfer, and

(b) their value is taken by virtue of section 176 below to be less than the value previously determined.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) A business or interest in a business, or shares in or securities of a company, are not relevant business property if the business or, as the case may be, the business carried on by the company consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments.

(4) Subsection (3) above—

(a) does not apply to any property if the business concerned is wholly that of a market maker or is that of a discount house and (in either case) is carried on in the United Kingdom, and

(b) does not apply to shares in or securities of a company if the business of the company consists wholly or mainly in being a holding company of one or more companies whose business does not fall within that subsection.

(4A) Subsection (3) above also does not apply to any property if the business concerned is of a description set out in regulations under section 106(5) of the Finance Act 1986.

(5) Shares in or securities of a company are not relevant business property in relation to a transfer of value if at the time of the transfer a winding-up order has been made in respect of the company or the company has passed a resolution for voluntary winding-up or is otherwise in process of liquidation, unless the business of the company is to continue to be carried on after a reconstruction or amalgamation and the reconstruction or amalgamation either is the purpose of the winding-up or liquidation or takes place not later than one year after the transfer of value.

(6) Land, a building, machinery or plant owned by the transferor and used wholly or mainly for the purposes of a business carried on as mentioned in subsection (1)(d) or (e) above is not relevant business property in relation to a transfer of value, unless the business or the transferor’s interest in it is, or shares or securities of the company carrying on the business immediately before the transfer are, relevant business property in relation to the transfer.

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