I8.231 Restriction on freedom to dispose
IHTA 1984, s 163 is aimed primarily at the type of restriction commonly written into partnership agreements and at options to purchase property at a future date at a price which is less than full market value, although it is not limited to these common situations. It includes rights of pre-emption, options, and rights of succession under partnership agreements or any agreements similar to a partnership but which are not partnerships in the strict sense1. It applies to transfers on death, regardless of when the restriction was imposed; but in the case of a transfer other than on death it applies only where the restriction was created on or after 27 March 19742.
It provides that where property, which has to be valued in connection with a transfer, is reduced in value by a contract which excludes or restricts the right to dispose of it, the exclusion or restriction is disregarded except to the extent that consideration in money or money's worth was given for it. It is the situation in existence at the time of the transfer which is relevant. It is immaterial whether the option is subsequently exercised3. It should be noted that the exclusion or restriction is not disregarded in assessing the IHT consequences of the drawing up of the contract in the
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