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A transfer of value is a disposition made by a person as a result of which the value of his estate immediately thereafter is less than it would have been but for the disposition¹ (see I3.111).

However, a disposition is not a transfer of value if it lacks gratuitous intent (a subjective test) and either:

1. Ìý

   (a)ÌýÌýÌýÌý it was made in a transaction at arm's length between unconnected persons, or

2. Ìý

   (b)ÌýÌýÌýÌý it was made on such terms as might be expected in a transaction at arm's length between unconnected persons (an objective test)² (see I3.141)

The distinction between the conditions (a) and (b) may appear marginal, but it is not. If unconnected parties deal at arm's length, the fact that one of them makes a poor bargain does not prevent the transaction from being commercial. If, however, those parties are connected and make the same deal, it may prove difficult to avoid a charge to IHT. The test in (b) above is not whether the parties in question would