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Basic principles

Partners may agree amongst themselves to vary the terms of their agreement at any time.

In many cases the variation will not result in property passing either between the partners, or from them to some other party. An example might be where the partners merely change the extent of their covenants to give their time and energy to the partnership business. In those circumstances, it is considered that the variation will involve no disposition and so will be outside the scope of IHT. This is because there can be no transfer of value without a disposition¹ — see I3.111.

If, on the other hand, a variation does have a dispositive effect, each partner whose estate is thereby reduced will make a transfer of value unless he can show that his disposition lacked gratuitous intent and was made on suitable arm's length terms² — see I3.141–I3.148 and I6.203.

Dispositive variations are most likely to occur in connection with a change in the partners' shares themselves, or with a change