Inheritance Tax Act 1984

[F1 PART 1 U.K. Overseas property with value attributable to UK residential property

Textual Amendments

F1 Sch. A1 inserted (with effect in accordance with Sch. 10 para. 9 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 10 para. 1 (with Sch. 10 para. 9(2))

Introductory U.K.

1 U.K. Property is not excluded property by virtue of section 6(1) or 48(3)(a) if and to the extent that paragraph 2 or 3 applies to it.

Close company and partnership interests U.K.

2 (1) This paragraph applies to an interest in a close company or in a partnership, if and to the extent that the interest meets the condition in sub-paragraph (2). U.K.

(2) The condition is that the value of the interest is—

(a) directly attributable to a UK residential property interest, or

(b) attributable to a UK residential property interest by virtue only of one or more of the following—

(i) an interest in a close company;

(ii) an interest in a partnership;

(iii) property to which paragraph 3 (loans) applies.

(3) For the purposes of sub-paragraphs (1) and (2) disregard—

(a) an interest in a close company, if the value of the interest is less than 5% of the total value of all the interests in the close company;

(b) an interest in a partnership, if the value of the interest is less than 5% of the total value of all the interests in the partnership.

(4) In determining under sub-paragraph (3) whether to disregard a person's interest in a close company or partnership, treat the value of the person's interest as increased by the value of any connected person's interest in the close company or partnership.

(5) In determining whether or to what extent the value of an interest in a close company or in a partnership is attributable to a UK residential property interest for the purposes of sub-paragraph (1), liabilities of a close company or partnership are to be attributed rateably to all of its property, whether or not they would otherwise be attributed to any particular property.

Loans U.K.

3 U.K. This paragraph applies to—

(a) the rights of a creditor in respect of a loan which is a relevant loan (see paragraph 4), and

(b) money or money's worth held or otherwise made available as security, collateral or guarantee for a loan which is a relevant loan, to the extent that it does not exceed the value of the relevant loan.

4 (1) For the purposes of this Schedule a loan is a relevant loan if and to the extent that money or money's worth made available under the loan is used to finance, directly or indirectly— U.K.

(a) the acquisition by an individual, a partnership or the trustees of a settlement of—

(i) a UK residential property interest, or

(ii) property to which paragraph 2 to any extent applies, or

(b) the acquisition by an individual, a partnership or the trustees of a settlement of an interest in a close company or a partnership (“the intermediary”) and the acquisition by the intermediary of property within paragraph (a)(i) or (ii).

(2) In this paragraph references to money or money's worth made available under a loan or sale proceeds being used “indirectly” to finance the acquisition of something include the money or money's worth or sale proceeds being used to finance—

(a) the acquisition of any property the proceeds of sale of which are used directly or indirectly to finance the acquisition of that thing, or

(b) the making, or repayment, of a loan to finance the acquisition of that thing.

(3) In this paragraph references to the acquisition of a UK residential property interest by an individual, a partnership, the trustees of a settlement or a close company include the maintenance, or an enhancement, of the value of a UK residential property interest which is (as the case may be) the property of the individual, property comprised in the settlement or property of the partnership or close company.

(4) Where the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan.

(5) Where a proportion of the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan by the same proportion.

(6) In this Schedule, references to a loan include an acknowledgment of debt by a person or any other arrangement under which a debt arises; and in such a case references to money or money's worth made available under the loan are to the amount of the debt.]