Where a close company has an interest in possession in settled property, the participators in that company are treated (except under IHTA 1984, s 55) as being entitled to the interest in possession in proportion to their rights and interests in the company1 — see also I5.204 and I5.229.
This is subject to the exception under IHTA 1984, s 55 (the acquisition of reversionary interests — see I5.726).
This section2 only applies to an interest in possession to which a company became entitled on or after 22 March 2006 (whether or not the company was a close company when it became entitled to the interest) if it is an immediate post-death interest (I5.205)3, a transitional serial interest (I5.206)4 or an interest within IHTA 1984, s 5(1B) (commercial transaction — see I5.209).
In other words, the interest must be a qualifying interests in possession (QIIP) — see Division I5.2
Where s 101(1) does not apply the company is not treated as having an interest in possession and the value of the interest is left out of account in valuing the shares for IHT purposes5.
Each participator will be treated as beneficially entitled to part of the interest in possession, and there will be a deemed termination of part or all of his deemed interest in possession whenever there is a change in the proportion of the settled property which he is deemed to have an interest in. This could be