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Basic rules

Where a close company has an interest in possession in settled property, the participators in that company are treated (except under IHTA 1984, s 55) as being entitled to the interest in possession in proportion to their rights and interests in the company¹ – see also I5.204 and I5.229.

This is subject to the exception under IHTA 1984, s 55 (the acquisition of reversionary interests – see I5.726).

This section² only applies to an interest in possession to which a company became entitled on or after 22 March 2006 (whether or not the company was a close company when it became entitled to the interest) if it is an immediate post-death interest (I5.205)³, a transitional serial interest (I5.206)⁴ or an interest within IHTA 1984, s 5(1B) (commercial transaction — see I5.209).

In other words, the interest must be a qualifying interests in possession (QIIP) — see Division I5.2.

Where s 101(1) does not apply the company is not treated as having an interest