SVM111020 - IHT Business Property Relief: Business Relief Practice Notes
For Business Relief (BR):
a. There is no statutory requirement for a claim to be made before relief is given. If relief is due it should be given. Accordingly, a valuer needs to consider whether business relief (BR) is due on each occasion a share valuation is undertaken for IHT.
b. The valuer should ensure that there is a copy of the latest accounts before the valuation date has been consulted. This will allow them to make an initial assessment of the nature of the company’s business.
c. Any question concerning BR or, where appropriate, the amount of the value transferred entitled to relief should be dealt with either before a detailed consideration of value or, if there is only partial relief, at the same time as the value is considered.
In any IHT case, therefore, a valuer should initially consider whether 100% BR is available on the whole or part of the value transferred. They should bear in mind that with effect for deaths and other transfers from 6 April 2026 (and including transfers made within 7 years of a death on or after 6 April 2026 if they were made on or after 30 October 2024) the highest rate of relief (100%) will be available on the combined value of qualifying agricultural and/or business property up to £2.5 million, or up to £5m if unused allowance can be transferred from a pre-deceased spouse or civil partner. This will only be due on the chargeable value of relievable property and will not apply to exempt transfers of relievable property. Any value in respect of total relievable property which exceeds the allowance will qualify for relief at 50%. See IHTM25500.
Additionally, shares in companies listed on a market that does not meet the definition of ‘listed’ for HM Revenue and Customs (HMRC) purposes (such as Alternative Investment Market (AIM)) and shares that are traded on a foreign stock exchange that is not a recognised stock exchange, can now only qualify for 50% relief.
Finally, if the question of whether BR is available is not straightforward and the value before relief might not be great enough to cause the taxable limit to be exceeded.
Entitlement to relief
1. To be entitled to relief the value transferred must be attributable to 'relevant business property' and to qualify as 'relevant business property' for this purpose an asset must:
a. fall within the general description of 'relevant business property’
b. satisfy the 'minimum period of ownership' provisions, and
c. not be subject to a binding contract for sale.
Additionally, where the asset comprises shares or securities in a company:
a. the company must not be in the course of liquidation,
b. it must carry on a business for gain, and
c. that business must be a qualifying business.
2. All the conditions have to be satisfied.
3. In addition, relief cannot extend to any value attributed to 'Excepted Assets'. This is discussed in this chapter at SVM111210 onwards.
4. In the case of a 'non-interest in possession' (discretionary) settlement and other settlements which, post Finance Act (FA) 2006, are subject to ten-year anniversary and exit charges, references to the 'transferor' should be taken as references to the trustees of the settlement and references to the 'transfer' to the occasion of charge (section 103(1) Inheritance Tax Act (IHTA) 1984).
5. Except in non-interest in possession settlements or other settlements which, post FA2006, are subject to ten-year anniversary and exit charges the words 'own' and 'ownership' are considered to relate to beneficial entitlement. This includes a qualifying beneficial interest in possession in settled property.
Example
A deceased person owned 5000 shares in their own right and was entitled to the income from a will trust fund which included another 2000 shares in the company. Their total beneficial interest was in 7,000 shares.
For non-interest in possession discretionary trust cases or other trusts which, post FA2006, are subject to ten-year and exit charges the words are equated with legal ownership by the trustees.
Additional Guidance: SVM150000