Inheritance Tax Act 1984 Schedule A1 paragraph 2

Close company and partnership interests

Schedule A1 paragraph 2 sets out when an interest in a close company or partnership is treated as having value attributable to UK residential property, bringing it within the scope of inheritance tax even if the interest itself is an overseas asset.

• An interest in a close company or partnership falls within this provision to the extent that its value is directly or indirectly attributable to a UK residential property interest
• Indirect attribution applies where the value traces through to UK residential property solely via other close company interests, partnership interests, or certain loans
• Interests worth less than 5% of the total value of all interests in the company or partnership are disregarded, but connected persons' holdings are aggregated when testing this 5% threshold
• When determining how much of an interest's value is attributable to UK residential property, the liabilities of the company or partnership must be spread rateably across all its property rather than allocated to any specific asset