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

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) (read with sub-sections (5) and (7)) or for the benefit of the settlor or of any person connected with the settlor. For the purposes of IHTA1984/S75, references to the time of the transfer of value in IHTA1984/S28(4) will be to the time when the property ceased to be relevant property.

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).