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IHTM42948 | Employee benefit trusts: Inheritance Tax operation: settled shares or securities becoming subject to employee benefit trusts

From HM Revenue & Customs · Inheritance Tax Manual

IHTA84/S75 gives relief from the exit charge under IHTA84/S65 where company shares or securities cease to be relevant property and become held on a S86 trust. IHTA84/S75(1) provides that tax is not to be charged under IHTA84/S65 in respect of shares or securities of a company held on trusts that fit the description specified in IHTA84/S86 (1), provided the following conditions are satisfied:

  • the persons for whose benefit the trusts permit the property to be applied include all or most of the persons employed by or holding office with the company,

  • that at the date when the shares or securities ceased to be relevant property (or at a date not more than one year afterwards) both the conditions in IHTA84/S28(2) (read with sub-sections (3) and (6)) are satisfied, without taking account of shares or securities held on other trusts, and

  • the trusts do not permit any of the property to be applied at any time (whether during a period referred to in IHTA84/S86(1) or later) for the benefit of any of the persons mentioned in IHTA84/S28(4) and IHTA84/S28(6A) (read with sub-sections (5) and (7)) or for the benefit of the settlor or of any person connected with the settlor.

  • For transfers of value made on or after 30 October 2024, the shares in or securities of the company must also have been comprised in the settlement throughout the period of two years ending with the date on which they cease to be relevant property.

  • For the purposes of IHTA1984/S75, references to the time of the transfer of value in IHTA1984/S28(4) and IHTA84/S28(6A) will be to the time when the property ceased to be relevant property.

  • A reference in subsection IHTA84/S75 (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. “Reorganisation of share capital” means a transaction to which section 127 of TCGA 1992 (CG51805) applies or would apply but for section 134 of that Act. “The original shares” and “the new holding” have the meaning given by section 126(1) of TCGA 1992 (CG51730).

A similar relief where shares or securities cease to be relevant property and become held on trusts that qualify as an Employee Ownership Trust (IHTM42995) is provided by IHTA84/S75A (IHTM42997).