Inheritance Tax Act 1984 section 98

Effect of alterations of capital, etc.

Section 98 deals with how alterations to a close company's unquoted share or loan capital, or to the rights attached to its unquoted shares or debentures, are treated as dispositions by the participators for inheritance tax purposes.

• Any alteration to a close company's unquoted share or loan capital, or to the rights attaching to its unquoted shares or debentures, is treated as a disposition made by the participators at the time of the alteration, whether or not it would normally be regarded as such.
• The alteration must not be taken into account when valuing the unquoted shares or debentures immediately before the time of the alteration — their value is determined as if the alteration had not occurred.
• "Alteration" includes extinguishment, such as where a person's rights and interests are caught up in a winding-up of the company.
• Any disposition arising under this section is not a potentially exempt transfer, meaning it is immediately chargeable to inheritance tax rather than becoming chargeable only on the transferor's death within seven years.