Commentary

I6.212A A summary of IHT on partnership formation

IHT, trusts and estates

I6.212A A summary of IHT on partnership formation

I6.212A A summary of IHT on partnership formation

There should be no transfer of value on the formation of a partnership, provided that the case comes within the commercial transactions exemption1 (see I3.141 and I6.203).

Each case must be decided on its merits, but the following summary gives guidance obtained from the judgments in Boden2 (see I6.211) and Ralli3 (see I6.212):

  1.  

    (a)     As soon as a person transfers capital to a partnership he reduces the value of his estate slightly because he will either have to enforce a dissolution to withdraw the capital, or he will be locked into the partnership for a certain or uncertain period. The lack of gratuitous intent may help to nullify any claim to IHT, provided that there is no additional loss to his estate4

  2.  

    (b)     If the parties are not related and it is not HMRC's view that partners are connected at the moment of formation

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