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HMRC internal manual

Shares and Assets Valuation Manual

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HM Revenue & Customs
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IHT Business Property Relief: Business Relief Practice Notes

  1. The Val 70 should indicate whether business relief has been claimed. However, there is no statutory requirement for a claim to be made before relief is given. If relief is due you should give it. Accordingly, you need to consider whether business relief is due on each occasion a share valuation is undertaken for IHT.
  2. If business relief has been claimed in respect of a transfer on death or a transfer which is taken into account as a result of a death for example, a failed PET, the accountable persons should have completed form D14. D14 is a supplementary form to the Inland Revenue Account that asks some basic questions about the eligibility to business relief. If a completed Form D14 does not accompany the Val 70, you should check with the IHT caseworker whether one is available and, if so, obtain it, unless the position is absolutely clear from the other information already on file.
  3. You should ensure that there is a copy of the latest accounts before the valuation date has been consulted. This will allow you to make an initial assessment of the nature of the company’s business.
  4. All Officer level caseworkers to whom business relief cases are divided and where the value of the shares transferred before BR would be in excess of £100,000 MUST show such cases to their developer or Team Leader before giving any commitment to allowing business relief.
  5. Any question concerning business relief 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.

If you can agree that the shares under consideration qualify for 100% BR, it will not be necessary to agree a value for them. In any IHT case, therefore, you should initially consider whether 100% BR is available and only move on to consider the value

* If 100% BR is not available on the whole or part of the value transferred or
* 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.
  1. Some aspects of Business Relief MUST be referred to the Appeals Team. You will find references to this throughout this Chapter. Please ensure that you do this via your team leader. Your reference to the Appeals Team should identify the specific problem(s) or issue(s) involved and include an analysis of the relevant facts. A full analysis of the company accounts should have been prepared and you should point to where this is to be found.

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:

 

  1. fall within the general description of ‘relevant business property’
  2. satisfy the ‘minimum period of ownership’ provisions, and
  3. not be subject to a binding contract for sale.

Additionally, where the asset comprises shares or securities in a company:

  1. the company must not be in the course of liquidation,
  2. it must carry on a business for gain, and
  3. that business must be a qualifying business.

 

  1. All the conditions have to be satisfied.
  2. In addition, relief cannot extend to any value attributed to ‘Excepted Assets’. This is discussed in this chapter at SVM111210 onwards.
  3. In the case of a ‘non-interest in possession’ (discretionary) settlement and other settlements which, post FA2006, 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 (s.103(1)).
  4. 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 his/her own right and was entitled to the income from a will trust fund which included another 2000 shares in the company. His/her 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