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HMRC internal manual

Inheritance Tax Manual

Settled property used in the life tenant's business: Property within IHTA84/S105 (1)(e)

IHTA84/S105 (1)(e) applies to

  • any land or building, machinery or plant which
  • immediately before the transfer
  • was used wholly or mainly for the purposes of a business carried on by the transferor and
  • was settled property in which the transferor was then beneficially entitled to an interest in possession.

Under IHTA84/S105 (6) the asset does not qualify for relief under IHTA84/S105(1)(e) unless the business carried on by the transferor is relevant business property (IHTM25151) in relation to the transfer.

IHTA84/S105 (1)(e) refers only to the moment of time immediately before the transfer.There is nothing in the legislation to require the transferor to have used the asset throughout any earlier period (contrast the minimum period of user requirement in IHTA84/S112 (3) referred to in IHTM25223 which applies to IHTA84/S105 (1)(d) does not to IHTA84/S105 (1)(e)). However the normal minimum period of ownership rules apply (IHTM25301).

This section applies from 10 March 1981 and gives relief on assets used in a sole business carried on by a life tenant. However, following the ruling in the case of Finch v IRC (1985) it has been accepted that these assets can qualify for relief at 100% as part of the transferor’s business passing on death.  S105(1)(e) will apply mainly to lifetime terminations of settled property.

You should also check the rules for the definition of business (IHTM25153) and machinery or plant (IHTM25227).