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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Assets excluded from relief: Introduction

The legislation contains anti-abuse provisions which are designed to prevent business relief applying to what are essentially non-business assets. Business relief does not apply to assets which, at the time of the transfer, either were not used in the business, IHTA84/S110 or had been inadequately or too briefly used, IHTA84/S112.

IHTA84/S110 and IHTA84/S112 have different functions:


  • Under IHTA84/S110 the value of a business or interest in a business for the purposes of the relief is its net value, i.e. the value of the assets used in the business less the liabilities incurred for the purposes of the business – any assets not used in the business (IHTM25342) cannot qualify for relief;
  • In broad terms IHTA84/S112 relates only to the assets used in the business and it makes them excepted assets (IHTM25351) (i.e. it excludes them from relief) unless


  • they were used wholly or mainly for the purposes of the business throughout the whole or the last two years of the relevant period, and
  • they are required for future use for those purposes.


So there is a two-stage process when you consider these provisions:

  • establish the assets used in the business at the date of the transfer (as part of the process of establishing the IHTA84/S110 net value), and then
  • apply the excepted assets test to the assets so used.