Section 74C — Inheritance Tax Act 1984: Interpretation of sections 74A and 74B

Interpretation of sections 74A and 74B 74C 1 Subsections (2) to (4) have effect for the purposes of sections 74A and 74B.

2 An individual has an interest in property comprised in a settlement if—

a the property, or any derived property, is or will or may become payable to, or applicable for the benefit of—

i the individual, ii the individual's spouse or civil partner, or iii a close company in relation to which the individual or the individual's spouse or civil partner is a participator or a company which is a 51% subsidiary of such a close company, in any circumstances whatsoever, or b a person within sub-paragraph (i), (ii) or (iii) of paragraph (a) enjoys a benefit deriving (directly or indirectly) from the property or any derived property.

3 A “relevant reduction” in the value of the individual's estate occurs—

a if and when the value of the individual's estate first becomes less than it would have been in the absence of the arrangements, and b on each subsequent occasion when the value of that estate becomes less than it would have been in the absence of the arrangements and that difference in value is greater than the sum of any previous relevant reductions.

4 The amount of a relevant reduction is—

a in the case of a reduction within subsection (3)(a), the difference between the value of the estate and its value in the absence of the arrangements, and b in the case of a reduction within subsection (3)(b), the amount by which the difference in value mentioned in that provision exceeds the sum of any previous relevant reductions.

5 In sections 74A and 74B and this section— “ arrangements ” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations; “ close company ” has the meaning given in section 102; “ derived property ”, in relation to any property, means— income from that property, property directly or indirectly representing— proceeds of that property, or proceeds of income from that property, or income from property which is derived property by virtue of paragraph (b); “ operation ” includes an omission; “ participator ” has the meaning given in section 102; “ the relevant time ” means— the time the relevant reduction occurs, or if later, the time section 74A first applied; “ 51% subsidiary ” has the same meaning as in the Corporation Tax Acts (see Chapter 3 of Part 24 of the Corporation Tax Act 2010).