Section 13: Dispositions by close companies for benefit of employees., Inheritance Tax Act 1984

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—

the persons employed by or holding office with the company, or

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

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 person who is , at the time of the disposition, a participator in the company making the disposition, or

any other person who is , at the time of the disposition, 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

any other person who is 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

any person who is , at the time of the disposition or any later time, connected with any person within paragraph (a), (b) or (c) above.

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

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

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

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

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

if the trusts are those of a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988, of any power to appropriate shares in pursuance of the scheme ; or

if the trusts are those of a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003, of any power to appropriate shares to, or acquire shares on behalf of, individuals under the plan.

Subsection (4)(a) does not apply if, immediately after the disposition of property mentioned in subsection (1), more than 25% of relevant beneficiaries are (disregarding subsection (4)(a)) persons falling within subsection (2)(a) to (d).

In subsection (4A) "relevant beneficiary" means a person who—

is a person for whose benefit the trusts permit the property to be applied, and

is a person employed by or holding office with the company mentioned in subsection (1).

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 the meaning given by section 1159 of and Schedule 6 to the Companies Act 2006;

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.

Section 13: Dispositions by close companies for benefit of employees.

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