Finance Act 1986

3 (1) Where either sub-paragraph (3)(c) or sub-paragraph (6) of paragraph 2 above applies to determine, for the purposes of the principal section, the property comprised in a gift made by the donor— U.K.

(a) the value of any consideration in money or money’s worth given by the donee for the acquisition in pursuance of the right referred to in the said sub-paragraph (3)(c) or for the issue or grant referred to in the said sub-paragraph (6), as the case may be, shall be allowed as a deduction in valuing the property comprised in the gift at any time after the consideration is given, but

(b) if any part (not being a sum of money) of that consideration consists of property comprised in the same as another gift from the donor and treated for the purposes of the 1984 Act as forming part of the donor’s estate immediately before his death or as being attributable to the value transferred by a potentially exempt transfer made by him, no deduction shall be made in respect of it under this sub-paragraph.

(2) For the purposes of sub-paragraph (1) above, there shall be left out of account so much (if any) of the consideration for any shares in debentures of a body corporate, or for the grant of any right to be issued with any shares or debentures, as consists in the capitalisation of reserves of that body corporate, or in the retention by that body corporate, by way of set-off or otherwise, of any property distributable by it, or is otherwise provided directly or indirectly out of the assets or at the expenses of that or any associated body corporate.

(3) For the purposes of sub-paragraph (2) above, two bodies corporate shall be deemed to be associated as if one has control of the other or if another person has control of both.