Inheritance Tax Act 1984 section 96

Preference shares disregarded

Section 96 provides that preference shares in a close company should be ignored when working out how a transfer of value is apportioned among participators, where those preference shares are only marginally affected by the transfer compared with other shares in the company.

• Applies where part of a close company's share capital consists of preference shares as defined in section 1023(5) of the Corporation Tax Act 2010
• If a transfer of value by the close company (or another close company) has only a small effect on the value of the preference shares compared with its effect on other parts of the share capital, the preference shares are left out of account
• The purpose is to simplify the apportionment of the deemed transfer among participators under section 94 (charge on participators) and section 95 (participators in two companies)
• By excluding preference shares with minimal impact, the allocation of the inheritance tax charge is concentrated on those participators whose shareholdings are materially affected by the transfer of value