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HMRC internal manual

Shares and Assets Valuation Manual

IHT Business Property Relief: Investment businesses

S.105(3) refuses relief for a business or interest in a business, or shares or securities of a company, if the business (or the company’s business) consists wholly or mainly of one or more of the following:

  • dealing in securities, stocks or shares
  • dealing in land or buildings,
  • or making or holding investments.

But, under s.105(4) this refusal of relief does not apply:

a. to any property if the business concerned is wholly that of a market maker or is that of a discount house and (in either case) is carried on in the UK. (New legislation (SI 2012/2903) extends this to market makers or discount houses who conduct business in any European Economic area (EEA) state from 31 December 2012) or

b. to shares or securities of a company if its business consists wholly or mainly in being a holding company of one or more companies whose business does not fall within s.105(3).

‘Market maker’ is defined by IHTA84/s105(7) as a person who:

a. holds himself out at all normal times in compliance with the rules of The Stock Exchange as willing to buy and sell securities, stocks or shares at a price specified by him, and

b. is recognised as doing so by the Council of The Stock Exchange’.

HMRC also have power to make regulations providing that IHTA84/s105(7) shall have effect as if the references in it to ‘The Stock Exchange’ and the ‘Council of The Stock Exchange’ were references to any recognised investment exchange within the meaning of the Financial Services Act 1986.

The Board have exercised that power. The business of market maker or principal trader on LIFFOE can qualify for business relief (because IHTA84/s105(3) is excluded) on transfers of value on or after 23 March 1992. LIFFOE is short for the London International Financial Futures and Options Exchange which was formed on 23 March 1992 by the merger of the London International Financial Futures Exchange (LIFFE) and the London Traded Options Market (LTOM).

  Additional Guidance: SVM150000