SVM108260 | Inheritance Tax: Close Companies - Claims under sections 94 - 102 IHTA 1984

Such claims arise in respect of transfers by close companies or alterations in their share/loan capital or the rights attaching to them. Sections 94 to 102 IHTA 1984 looks through the company by attributing to the participators in a close company a transfer of value made by the company and treat alterations in capital or rights as if they are dispositions made by the participators.

Close Company

To be covered by this legislation the company must be a close company as defined in section 102(1) IHTA 1984. CTM60060 is helpful in explaining the meaning of "close company" for this purpose. In very general terms, a close company is one that is under the control of five or fewer participators or of participators who are directors. Additionally, a company is also a close company if, on a notional winding-up, five or fewer participators would be entitled to receive more than half of any distributions. Though its precise definition is rather wider, "participator" broadly means "shareholder".

Additional Guidance: SVM150000