I3.117 Failure to exercise a right as a disposition
Where a person deliberately omits to exercise a right and, as a result of that omission, the value of his estate is diminished and either the estate of another person is increased, or the value of settled property (not subject to an interest in possession) is increased, the omission is treated as though it were a disposition1. See Division I5.3 for further information on relevant property settlements.
Although this rule requires there to be an increase in the value of the estate of another person or of settled property with no interest in possession2, the tax is still charged by reference to the loss of value to the person omitting to exercise the right. Neither the person omitting to exercise the right nor the person whose estate is increased has to be an individual — see the discussion of person in I3.113.
The right may be either connected with property or purely contractual. It does not include rights which are primarily of a personal or non-pecuniary nature, where the failure to exercise does not diminish the value of the estate, such as the deliberate failure to vote at a company meeting on a topic where the failure does not result in a decrease in the value of the right-holder's estate3. In cases where the right is exercisable at a specific time (such as a right to vote at a company meeting) that is the time at which the deemed disposition takes place. Where