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

From HM Revenue & Customs · Inheritance Tax Manual

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

  • either by themselves or together with other securities, and/or any unquoted shares, owned by the transferor

  • give the transferor control of the company immediately before the transfer.

From 6 April 2026, this excludes controlling holdings of unquoted securities traded on a recognised UK stock exchange which were moved to S105(1)(ab) and controlling holdings of unquoted securities traded on a stock exchange outside the UK which is not a recognised stock exchange, which were moved to S105(1)(ad) (IHTM25570).

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). From 6 April 1996 unquoted shares, whether or not they gave control, were transferred to IHTA84/S105 (1)(bb). So, this provision has since applied only to securities.

The rate of relief is 100% from 10 March 1992 to 5 April 2026. From 6 April 2026, where appropriate, the 100% rate is subject to the lifetime allowance for APR/BPR (IHTM25500) and if the securities are unquoted securities which are traded on a recognised UK stock exchange or unquoted securities which are traded on a stock exchange outside the UK which is not a recognised stock exchange, the rate of relief is 50%.

For the purposes of IHTA84/S105(1)(b) (from 10 March 1992), ‘unquoted’ meant not quoted on a recognised stock exchange. And with effect from 6 April 1996 ‘not quoted’ was replaced by ‘not listed’. So, for chargeable transfers up to 5 April 2026, IHTA84/S105(1)(b) can apply to securities listed on a market that does not meet the HMRC definition of ‘listed’ (IHTM18131).

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 (IHTM25224)

  • so 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, so shares or securities in which the transferor had a qualifying interest in possession (settled property) are taken into account

  • only securities which contribute to the transferor’s control count; 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

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