Inheritance Tax Act 1984

Dispositions that are not transfers of value U.K.

10 Dispositions not intended to confer gratuitous benefit. U.K.

(1) A disposition is not a transfer of value if it is shown that it was not intented, and was not made in a transaction intended, to confer any gratuitous benefit on any person and either—

(a) that it was made in a transaction at arm’s length between persons not connected with each other, or

(b) that it was such as might be expected to be made in a transaction at arm’s length between persons not connected with each other.

(2) Subsection (1) above shall not apply to a sale of [F1 unquoted shares or unquoted debentures] unless it is shown that the sale was at a price freely negotiated at the time of the sale or at a price such as might be expected to have been freely negotiated at the time of the sale.

(3) In this section—

• “disposition” includes anything treated as a disposition by virtue of section 3(3) above;

• “transaction” includes a series of transactions and any associated operations.

Textual Amendments

F1 Finance Act 1987 Sch. 8, para. 1,with effect from 17March 1987.Originally

“shares or debentures not quoted on a recognised stock exchange”.

11 Dispositions for maintenance of family. U.K.

(1) A disposition is not a transfer of value if it is made by one party to a marriage in favour of the other party or of a child of either party and is—

(a) for the maintenance of the other party, or

(b) for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(2) A disposition is not a transfer of value if it is made in favour of a child who is not in the care of a parent of his and is for his maintenance, education or training for a period ending not later than the year in which—

(a) he attains the age of eighteen, or

(b) after attaining that age he ceases to undergo full-time education or training;

but paragraph (b) above applies only if before attaining that age the child has for substantial periods been in the care of the person making the disposition.

(3) A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance.

(4) A disposition is not a transfer of value if it is made in favour of an illegitimate child of the person making the disposition and is for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.

(5) Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

(6) In this section—

• “child” includes a step-child and an adopted child and “parent” shall be construed accordingly;

• “dependent relative” means in relation to any person—

  (a)

  a relative of his, or of his spouse, who is incapacitated by old age or infirmity from maintaining himself, or

  (b)

  his mother or his spouse’s mother, if she is widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage;

• “marriage”, in relation to a disposition made on the occasion of the dissolution or annulment of a marriage, and in relation to a disposition varying a disposition so made, includes a former marriage;

• “year” means period of twelve months ending with 5th April.

12 Dispositions allowable for income tax or conferring retirement benefits. U.K.

(1) A disposition made by any person is not a transfer of value if it is allowable in computing that person’s profits or gains for the purposes of income tax or corporation tax or would be so allowable if those profits or gains were sufficient and fell to be so computed.

(2) Without prejudice to subsection (1) above, a disposition made by any person is not a transfer of value if—

(a) it is a contribution to a retirement benefits scheme which is approved by the Board for the purposes of Chapter [F2 I of Part XIV of the M1 Taxes Act 1988] (occupational pension schemes) and provides benefits in respect of service which is or includes service as an employee (as defined in that Chapter) of that person; or

(b) it is made so as to provide—

(i) benefits on or after retirement for a person not connected with him who is or has been in his employ, or

(ii) benefits on or after the death of such a person for his widow or dependants,

and does not result in the recipient receiving benefits which, having regard to their form and amount, are greater than what could be provided under a scheme approved as aforesaid; [F3 or]

[F3 (c) it is a contribution under approved personal pension arrangements within the meaning of Chapter [F4 IV of Part XIV of the Taxes Act 1988] entered into by an employee of the person making the disposition.]

(3) Where a person makes dispositions of the kinds described in [F5 more than one paragraph] of subsection (2) above in respect of service by the same person, they shall be regarded as satisfying the conditions of that subsection only to the extent to which the benefits they provide do not exceed what could be provided by a disposition of the kind described in [F6 any one] of those paragraphs.

(4) For the purposes of subsection (2)(b) above, the right to occupy a dwelling rent-free or at a rent less than might be expected to be obtained in a transaction at arm’s length between persons not connected with each other shall be regarded as equivalent to a pension at a rate equal to the rent or additional rent that might be expected to be obtained in such a transaction.

(5) Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only, so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions.

Textual Amendments

F2 Substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para. 32.Originally

“II of Part II of the Finance Act 1970”.

F3 Finance Act 1987 (No.2), s. 98(2),with effect from 23July 1987.

F4 Substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29, para.32.Originally

“II of Part I of the Finance (No.2) Act 1987.”

F5 Substituted by Finance Act 1987 (No. 2), s. 98(3)with effect from 23July 1987.Originally

“both paragraph (a) and paragraph (b)”.

F6 Substituted by Finance Act 1987 (No. 2), s. 98(3)with effect from 23July 1987.Originally

“either”.

Marginal Citations

M1 1988 c. 1.

13 Dispositions by close companies for benefit of employees. U.K.

(1) A disposition of property made to trustees by a close company whereby the property is to be held on trusts of the description specified in section 86(1) below is not a transfer of value if the persons for whose benefit the trusts permit the property to be applied include all or most of either—

(a) the persons employed by or holding office with the company, or

(b) the persons employed by or holding office with the company or any one or more subsidiaries of the company.

(2) Subsection (1) above shall not apply if the trusts 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—

(a) a person who is a participator in the company making the disposition, or

(b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for this section would have been a transfer of value, or

(c) any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company, or

(d) any person who is connected with any person within paragraph (a), (b) or (c) above.

(3) The participators in a company who are referred to in subsection (2) above do not include any participator who—

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

(b) on a winding-up of the company would not be entitled to 5 per cent. or more of its assets.

(4) In determining whether the trusts permit property to be applied as mentioned in subsection (2) above, no account shall be taken—

(a) of any power to make a payment which is the income of any person for any of the purposes of income tax, or would be the income for any of those purposes of a person not resident in the United Kingdom if he were so resident, or

(b) if the trusts are those of a profit sharing scheme approved under [F7 Schedule 9 to the M2 Taxes Act 1988], of any power to appropriate shares in pursuance of the scheme.

(5) In this section—

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

• “ordinary shares” means shares which carry either—

  (a)

  a right to dividends not restricted to dividends at a fixed rate, or

  (b)

  a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above,

• “subsidiary” has [F8 the meaning given by section 736 of] the [F9 M3 Companies Act 1985];

and references in subsections (2) and (3) above to a participator in a company shall, in the case of a company which is not a close company, be construed as references to a person who would be a participator in the company if it were a close company.

Textual Amendments

F7 Substituted by Income and Corporation Taxes Act 1988 (c. 1. SIF 63:1), Sch. 29, para. 32.Originally

“the Finance Act 1978”.

F8 Companies Act 1989 s. 144(4)and Sch. 18 para. 30(2),with effect from the appointed day—on and after 1November 1990 (S.I. 1990 No.1392).Originally

“the same meaning as in”.

F9 Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), Sch. 2,with effect from 1July 1985.Originally

“Companies Act 1948”.

Marginal Citations

M2 1988 c. 1.

M3 1985 c. 6.

14 Waiver of remuneration. U.K.

(1) Subject to subsection (2) below, the waiver or repayment of an amount of remuneration is not a transfer of value if, apart from the waiver or repayment, that amount would be assessable to income tax under Schedule E.

(2) Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section shall apply only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.

15 Waiver of dividends. U.K.

A person who waives any dividend on shares of a company within twelve months before any right to the dividend has accrued does not by reason of the waiver make a transfer of value.

16 Grant of tenancies of agricultural property. U.K.

(1) The grant of a tenancy of agricultural property in the United Kingdom, the Channel Islands or the Isle of Man for use for agricultural purposes is not a transfer of value by the grantor if he makes it for full consideration in money or money’s worth.

(2) Expressions used in subsection (1) above and in Chapter II of Part V of this Act have the same meaning in that subsection as in that Chapter.

17 Changes in distribution of deceased’s estate, etc. U.K.

None of the following is a transfer of value—

(a) a variation or disclaimer to which section 142(1) below applies;

(b) a transfer to which section 143 below applies;

(c) an election by a surviving spouse under section 47A of the Administration of M4 Estates Act 1925;

(d) the renunciation of a claim to legitim within the period mentioned in section 147(6) below.

Marginal Citations

M4 1925 c.23.