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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Settled property used in the life tenant's business: Scope of IHTA84/S105 (1)(e) in practice

IHTA84/S105 (1)(e) applies only to settled property. It makes business relief available for transfers of qualifying assets in which the transferor had an interest in possession. It applies to lifetime transfers only.

Business relief at 100% under IHTA84/S105 (1)(a) is available on a transfer on death where the transfer is a combined one of the deceased’s business, or interest in a business, and the qualifying settled property used in their business (IHTM25154)). However there is some doubt whether this can apply to a lifetime transfer.

So in practice you only need to consider the 50% relief under IHTA84/S105 (1)(e) if there was a lifetime transfer of the qualifying settled assets by themselves. The most common example is where the transferor’s interest under the settlement comes to an end in his lifetime and he dies within seven years. A charge would arise under IHTA84/S52(1) on the land but not on the business.

Settled property may also qualify for relief under IHTA84/S105(1)(d).