Heath was the Conservative prime minister from 1970 to 1974.
Wiltshire police said it would lead the investigation:
Sir Edward Heath has been named in relation to offences concerning children. He lived in Salisbury for many years and we would like to hear from anyone who has any relevant information that may assist us in our enquiries or anyone who believes they may have been a victim.
Here's the full statement from The Independent Police Complaints Commission:
Investigation following allegations of historic corruption linked to child sexual abuse allegations
Aug 3, 2015
The Independent Police Complaints Commission (IPCC) is to investigate allegations concerning Wiltshire Police's handling of an alleged claim of child sexual abuse made in the 1990s.
It is alleged that a criminal prosecution was not pursued, when a person threatened to expose that Sir Edward Heath may have been involved in offences concerning children. In addition to this allegation, the IPCC will examine whether Wiltshire Police subsequently took any steps to investigate these claims.
The allegations were referred to the IPCC by Wiltshire Police following allegations made by a retired senior officer.
If you or someone you know has been affected by the issues referred to, you can speak to trained counsellors at the NSPCC on 0800 800 5000 or email help@nspcc.org.uk