Inheritance Tax Act 1984 section 113

Contracts for sale

Section 113 deals with the impact of a binding contract for sale on property that would otherwise qualify as relevant business property for business property relief purposes.

• Property that is subject to a binding contract for sale at the time of a transfer of value loses its status as relevant business property and therefore cannot attract business property relief.
• An exception applies where the property is a business or interest in a business being sold to a company that will carry on that business, and the sale consideration consists wholly or mainly of shares in or securities of that company.
• A further exception applies where the property consists of shares in or securities of a company and the sale is being made for the purpose of a company reconstruction or amalgamation.
• Partnership or shareholder "buy and sell" agreements, where surviving partners or directors are obliged to purchase and personal representatives are obliged to sell the deceased's interest, can constitute a binding contract for sale and prevent business property relief, although this outcome is rare in practice.